Ten Methods Retirement Plan Professionals Can Improve Plan Sponsors
One of the trends that is transforming the defined contribution industry – particularly in the investment only market segment – is the evolving focus away from a “low cost above all” priority and towards an appreciation of the value and advice of a retirement plan professional can plan – Offer sponsors.
Before we discuss the many important ways a retirement plan professional can support plan sponsors, it is important to first distinguish between financial professionals, for whom retirement plans are a fringe of their business, and financial professionals, for whom retirement plans are their primary role – and in many cases only focus.
This distinction is necessary because much of the value a retirement plan professional can offer a plan sponsor comes from deep knowledge and experience with:
- Plan sponsor needs
- Plan the challenges and behaviors of the participants
- the laws and regulations for qualified retirement plans
- Industry trends and
- new and potential legislation.
The retirement plan professional brings value to sponsor planning on a number of critical points, including:
- Guide the plan sponsor through the Employee Retirement Income Security Act (ERISA) requirements and provide tools such as checklists, forms, and training modules to ensure that the plan operations prudent skill and care requirements are met.
- Assistance in planning plans to help a plan sponsor maintain their qualifying status, meet their plan goals, and maximize the impact of their performance dollars.
- Providing the assistance necessary to assist an organization in fulfilling its fiduciary duties. This support includes, among other things, the provision of guidance or support in the following areas:
- Formulation of an investment policy statement for the plan.
- Selecting and monitoring the plan’s investments and fund options.
- Educating the plan sponsors about their fiduciary duties.
- Support with the documentation of meetings and discussions.
- Carrying out an objective assessment of funds and other service providers, regardless of the investment platform or service provider.
- Assist plan sponsors in reducing plan costs by negotiating with service providers, finding more affordable investments, and generating more assets for the plan to lower costs.
- Perform comparative market analysis of plan fees, expenses, and revenue sharing to compare a plan against other service providers.
- Monitoring of the fulfillment of promised services by a service provider.
- Assisting in ensuring compliance with plans and updating corporate management and relevant committees on litigation, laws, industry trends and regulations that may affect the company’s plan and its trustees.
- Help improve participants’ outcomes through education and advice on financial wellness (e.g. budgeting and debt management), education on retirement planning and investment planning, and by increasing participation and contribution levels through personal, virtual, and online enrollment and education initiatives .
- Providing personalized, practical customer support services for any needs or problems that arise.
A survey of Plan Sponsors in 20191 found that more than 93% of Plan Sponsors work with a consultant – an all-time high for a 10 year study. The top two reasons for hiring a consultant were: (a) understanding how well the plan is working and how it can be improved; and (b) for assistance in administering the plan. This underlines the value of such professionals who provide retirement provision.
According to a study by Each Enterprise2 – a company serving the institutional retirement plan market – 75% of plan sponsors who work with a retirement plan-only advisor rated their advisor for periodic investment reviews and service provider due diligence as “outstanding”. In addition, 71% rated their advisor “excellent” for planning recommendations, and 77% said their advisor was “excellent” at overseeing the delivery of services by their pension provider.
With the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act 3, the value of retirement professionals will be further validated as they guide plan sponsors through the new safe haven to add prudent retirement features to plans, the new requirement for the facility’s Annual Lifetime Income Disclosure for participants and how plan sponsors can avoid the higher penalties for not submitting their required forms and notices in a timely manner.
Retirement planning is not a part-time activity, and we believe that plan sponsors seeking help with their retirement plan should turn to a retirement planning professional who is dedicated and focused on holistically planning sponsorships with a range of services. From our point of view, specialized advice from a pension plan professional has never been so valuable.