Smaller to mid-sized firms, trade and professional associations, financial advisors and legislators are fueling increased interest in Multiple Employer Plans (MEPs). The concern about the low retirement savings rate for millions of Americans, particularly those who do not work for large organizations, sparked demand in MEPs as a solution for small to mid-sized institutions to provide quality retirement plan benefits to their employees.
Updated January 2020
Retirement plan sponsors face a challenging legal and economic landscape in 2020. Regulation and litigation has increased dramatically over the past decade. While the Department of Labor’s fiduciary rule is now defunct, the SEC has adopted a best interest standard effective in 2020. While all qualified plan sponsors are fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA), legislative changes have made it confusing to determine which parties should share in that responsibility.
Since the vast majority of plan sponsors need to involve external plan managers in some capacity, it’s important to understand how financial professionals of different classes differ in what they bring to the table. Two major categories of professional assistants are available to sponsors. Broadly speaking, they can be grouped as investment brokers and retirement plan consultants.
Defined contribution (DC) plans were designed to help participants become retirement ready. However, nearly 40 years since their introduction, as people who began their careers in that period are hoping to leave the workforce, retirement readiness still tops the lists of concerns for DC plan sponsors and participants. Many employers sought for years to maximize employee participation, educate employees about diverse investment options and use their 401(k) or 403(b) plans to attract and retain staff. However, evidence shows that two thirds of employees with access to plans are not using them to save.
One of the most crucial tasks for modern human resources professionals is providing an attractive benefits package to employees. Retirement savings, pensions and health plans provide enormous value to existing workers and prospective talent, but administering these benefits also comes with strong administrative and even regulatory challenges. Organizations that decide to act as retirement plan sponsors and offer such plans have several key responsibilities to keep in mind.
The retirement planning space is competitive. 401(k) and 403(b) plan providers are under more pressure than ever to make sure that their services are competitive, both in terms of cost and performance. Still, the rising number of plan participant lawsuits filed against sponsors in recent years demonstrates that there remains significant leeway for less than competitive practices if sponsors aren’t vigilant. A vital component of this awareness is regular benchmarking of plan performance and fees against industry averages. This kind of cross-referencing is the responsibility of plan sponsors and can come with significant risks and opportunities. Below is a look at the factors that make sound benchmarking practices so crucial.