401(k) plans can be an important piece of a firm’s benefits
package. The first goal of a 401(k) is
for employees to reach their retirement objectives, with attracting and
retaining talent a close second. It is
wise to review your plan to ensure it meets these goals.
According to the latest Principal Retirement Security
Survey, 50% of plan sponsors are concerned that their employees may not be
adequately prepared for retirement.
What can firms do to improve retirement readiness?
Plan Design – Consider a reenrollment with default
investments and savings rates. This allows the sponsors to reset the
participants with increased savings rates and appropriate investment selection
through a Qualified Default Investment Alternative (QDIA). This can sound daunting, but record keepers
do the heavy lifting and participants can opt out. However, according to Vanguard, after one
year of a reenrollment, 92% of participants remained in the QDIA and 81% of the
savings rates remained.
Participant Education – One-on-one education can solidify
a reenrollment. Regular office visits
from the advisor provide participants guidance through reenrollments and
retirement readiness. This can even
include the advisor helping the participant budget for their contributions.
Provider Selection – It requires many puzzle pieces
to create a sound 401(k) plan and all teams need to work together. A plan advisor can review record keeper,
third-party administrator, and investment options to ensure the value proposition
is appropriate for the plan. Often, this
review discovers costs savings or enhancements in service or technology for the
Fiduciary Protection – While the plan sponsor can
never be absolved from all fiduciary responsibility, 3(38) advisory services
and 3(16) services are available to plan sponsors and can be a wise decision to
outsource some of this responsibility.
A 3(38) Investment Manager is a codified investment
fiduciary on a retirement plan as defined by ERISA section 3(38). Essentially, the 3(38) is responsible for
selecting, managing, monitoring, and benchmarking the investment offerings of
A 3(16) fiduciary is a service provider hired by an employer
to function as a “Plan Administrator,” by fulfilling a comprehensive set of
duties that many plan sponsors find demanding, including keeping the plan in
compliance with ERISA guidelines.
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