Finance

By Mark Olsen, Managing Director at PlanPILOT

Due to the significant amount of fiduciary responsibility of a retirement plan committee to both consider the best interests of the participants and properly oversee the administration of the plan, committee meetings ought to be as efficient and effective as possible. Like any other executive meeting, proper preparation and processes can deliver meaningful benefits to both the participants and the committee members themselves.

In our experience at PlanPILOT, effective preparation for plan committee meetings is a multifaceted endeavor, but doing so in a careful and structured manner should enable the committee to cover the many areas of plan administration, functionality, regulation changes, and investment evaluation. Here is a sampling of what we recommend.

Prepare a Structured Agenda

Like any other effective meeting, having a structured agenda at the ready is essential. Prepare the agenda well ahead of time and circulate drafts to committee members to solicit their input, potential sticking points, and innovative ideas. Steer and emphasize discussion topics toward critical areas of plan management to ensure due diligence requirements are fulfilled.

Investment analysis, selection, and monitoring are only a few aspects of the committee’s responsibilities. Include a comprehensive review and regulatory update of the committee’s fiduciary duties, such as overseeing plan administration and managing fees. Include elements of fiduciary training for committee members, which is a growing focus of the DOL and plan auditors. Include a rough timetable to get through the agenda while allowing adequate time for discussion and Q&A as needed. Once the meeting starts, stick to the agenda and rough timetable to avoid getting sidetracked and so the meeting ends as scheduled.

Assign Pre-Meeting Homework to Committee Members

Few things derail a meeting’s effectiveness more than unprepared committee members. Everyone should arrive at the meeting with a clear understanding of the agenda, the objectives of the discussions, and have their questions or concerns ready. Along with sending the prepared agenda to members in advance (that includes prior feedback), make sure to include—or provide access to—key documents that will be referenced or reviewed, and encourage members to review these beforehand. These documents can include investment performance reports, Investment Policy Statements (IPS), and other plan governing documents. If regulatory changes are to be considered, include summations of the changes and the implications for the plan going forward. Allow time for the members to ask and get answers to quick clarification questions ahead of time so the discussion isn’t interrupted or delayed unnecessarily.

Plan Meeting Topics Out a Whole Year Ahead

Each meeting should include the following agenda items:

• Review of the previous meeting’s minutes and acceptance by the committee
• Fiduciary training
• Investment due diligence
• Review of fund utilization

From there, if time remains, schedule other topics over the year that should cover all aspects of the plan which the committee should monitor:

• Changes in industry regulations and the marketplace

1. Updates on legislative and regulatory changes affecting the business and therefore the plan
2. Insights from recent litigation and key takeaways
3. Innovations in products or technology and emerging industry trends that may enhance or detract from future company profitability and growth

• Plan Investment Evaluation

1. Overview of financial market and economic conditions
2. Assessment of current investments against IPS standards; does the investment strategy and offerings meet these standards or is revision necessary?
3. Analysis of participant allocations across investments options; are some outdated or are new options available, requested, and viable?
4. Review of investment-related expenses; do these continue to meet industry standards and would satisfy DOL or auditor review? How do these compare with competitor or peer plans?
5. Regular discussion with the plan investment advisors as to whether changes in strategy, fund investments, and recordkeeper platform is warranted or needed

• Review of Plan Administration

1. Summary of plan activities including loans, contributions, and distributions. Are there symptoms that indicate problematic trends requiring plan amendments?
2. Examination of operational issues and testing outcomes
3. Addressing participant complaints and concerns
4. Evaluating participant education and effectiveness of these programs regarding participant understanding of plan benefits and options
5. Upcoming deadlines and reporting obligations for the plan. Are these imminent and being met in a timely fashion?
6. Potential for deficiencies as a result of annual audits and regulatory examinations

As mentioned, the complexity of plans and the inherent responsibility of retirement plan committees requires careful and diligent attention to a myriad of details. Only with careful and thorough meeting preparation can these committees efficiently carry out periodic meetings and successfully fulfill their duties and objectives.

Utilizing Professional Assistance

At PlanPILOT, our company is uniquely positioned to help you with these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

For a large percentage of today’s young workers, student loan debt continues to be a significant financial burden. Even with efforts by the federal government to ease loan burdens through forgiveness proposals, student loan payments are impacting the ability to move forward with their lives and financial goals. Specifically, surveys indicate that younger professionals and other workers are less willing or financially able to contribute to their employer-sponsored retirement plans, due to the high student loan payments they need to make each month.

Fortunately, employers now have a tool to help. A little-known provision in the SECURE 2.0 Act allows employers to make contributions to an employee’s retirement plan account that match the student loan repayments made by that employee each month or year. This allows the employee to both continue to make timely payments to reduce and pay off their student loan debt and grow their retirement accounts (through their own and employer matching contributions) at the same time.

Why Are Early Retirement Plan Contributions So Important?

In a word: compounding. Many studies demonstrate the importance of starting retirement contributions early in life. Early contributions allow the magic of compounding earnings in a retirement plan to grow more over a longer time period before retirement withdrawals begin. If younger workers delay starting or contributing to their employer plan accounts, they may have less favorable alternatives to build their retirement assets (e.g., saving more later on, deferring retirement and working longer, or compromising potential retirement lifestyle spending).

Advantages to Employers

Competition for talent is acute for employers. According to Bureau of Labor statistics, employees changing jobs has continued to increase since 2008. In 2023, 44 million workers quit their jobs and 3.4 million did so in January 2024 alone. Yet, hiring has still outpaced job changes, indicating employees (especially young employees) are seeking better opportunities and more attractive company benefits.

Logically, offering an employer benefit that potentially addresses a young job candidate’s chief financial concern (i.e., how to save for retirement while paying off higher-education debt) could be a key factor in attracting and retaining young talent. A higher employer match based on a young employee’s retirement plan contributions may not matter much to the job candidate if they’re unable to contribute to the plan in the first place.

Employers may also benefit from the goodwill generated by recognizing and providing a potential solution to a large societal and financial problem. Helping younger workers boost retirement savings while reducing debt can alleviate employee stress and financial concerns and promote job satisfaction and talent retention. Today’s younger generations are also looking at companies who demonstrate they care about their employees as people, not just workers.

How the Benefit Works

Employers who sponsor 401(k), 403(b), and governmental 457(b) plans or SIMPLE plans can make matching contributions to an employee’s retirement account if the employee is making regular qualified student loan payments (QSLPs) as long as the employer’s plan treats student loan payments the same as normal elective deferrals for match rates, vesting, and eligibility purposes. At present, employees must certify to their employers they are actually making student loan repayments and employers are allowed to rely on such certification without substantiation. Further refinements and regulations are likely forthcoming.

Qualified student loans are those loans utilized for qualified higher-education purposes (such as tuition, fees, room and board, etc.) as defined by IRC Section 221. The annual limit, including salary deferral elections, would be the same as allowed by the annual elective deferral limit. 

Example: Maureen, age 35, participates in an employer-sponsored 401(k) retirement plan that matches QSLPs as well as salary deferrals. The 2024 salary deferral limit for employees under age 50 is $23,000; Maureen defers $14,000 from her salary to her retirement plan. If she also makes $11,000 of QSLPs in 2024, only $9,000 ($23,000-$14,000) of those repayments can be matched by her employer. 

There are other preliminary rules that must also be followed. Since this benefit is relatively new to both employers and employee participants, careful discussion with recordkeepers and TPAs is essential, as well as providing proper and thorough education to employee-participants.

Utilizing Professional Assistance

Implementing new aspects to a retirement plan can present significant challenges to a plan sponsor, especially when considering the complexity of choices, fiduciary duties and responsibilities, and avoiding liability issues. You also want to facilitate a smooth implementation process and “get it right the first time” to foster confidence with your participants.

At PlanPILOT, our company is uniquely positioned to help you with these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Employer-sponsored retirement plans are in the midst of a significant evolution in how they will be designed to serve both employers and employee participants. As I summarized in a previous blog article, in just a few years all U.S. baby boomers will either have reached (or be on the cusp of reaching) retirement age and based on statistics will likely live another 20-30 years. 

Since the age of pension income has long since passed, retirees will need to spend their retirement savings to complement whatever Social Security benefits they receive as they transition from a life of savings accumulation to one of replacing working income to meet their expenses. However, as cited in many studies, including this one, participants are ill-equipped to understand and implement strategies to efficiently obtain ongoing retirement income that can both sustain their intended expenses and outlast their retirement years.

Due to liability protections offered by the SECURE Act of 2019, employers are now able to include income features with their employee retirement plans to help participants structure their accounts upon retirement to include retirement income solutions that could suit their needs and effectively help them manage their retirement finances. Even with these new protections, however, employers may still be unsure how to implement new provisions in their plan. At PlanPILOT, we’ve observed that not enough plan sponsors are offering retirement income features, and participants may be at a loss as to how to structure their retirement finances.

Understanding Participants’ Needs and Solution Criteria

As I’ve discussed, the individual needs of participants could greatly vary, so it’s important for plan sponsors to have a deep understanding of the participants’ general financial circumstances and long-term goals. Once this understanding is achieved and quantified, plan sponsors must assess the myriad of features offered within available income strategies and solutions for the plan to create a program that can help meet most or all of the stated participant objectives.

This includes educational features that guide participants through this life transition phase and helps them make informed decisions about which solutions best suit their own needs. Having this component fosters confidence in the program and further lowers liability risk for the plan sponsor. All this is the first step in creating a fully updated and relevant retirement plan.

Selecting Solutions: What to Implement

Once the needs of the participants and criteria for plan design have been established, the next step would be choosing the income solutions to implement. According to PGIM Research, stable value funds and an income fund within a target-date offering are the most widely used vehicles for retirement income. In-plan annuities (due, in part, to the opportunities afforded by the SECURE Act) are the most popular new solution being considered.

Choosing in-plan annuities could present a hurdle to overcome: whether the current recordkeeper/investment custodian is able to offer annuities within the plan. Annuities are a product of insurance companies, and while many insurance companies offer custodial and recordkeeper services to retirement plans, if the current recordkeeper is not an insurance company, changing to accommodate the new income features may be a problem, or at least a consideration. Further, the plan sponsor still has the fiduciary duty to vet any annuities offered in the plan. Currently, there are few resources to benchmark or qualify annuities, and the complexity of annuity products may be more than the plan sponsor is willing or qualified to handle. 

Plan sponsors may also consider alternative solutions, including managed payouts, guaranteed and non-guaranteed income options, or other annuity-like contracts. It’s critical to remember, however, that while more choices may sound like a good idea, as a fiduciary, plan sponsors are still required to examine and monitor these selections to verify they are appropriate for participants.

Advice and Education

Once the implementation of selected income solutions has been completed, it’s still crucial to provide educational features and programs within the plan. Participants will need help with planning appropriately to pursue their objectives, as well as the software and other tools. Guidance and advice from qualified financial professionals may be useful, especially for those who have reached retirement income phases of life. Such participants may have questions regarding optimal times to claim Social Security, apply for Medicare benefits, and charitable giving.

Utilizing Professional Assistance

Implementing new aspects to a retirement plan can present significant challenges to a plan sponsor, especially when considering the complexity of choices, fiduciary duties and responsibilities, and avoiding liability issues. You also want to facilitate a smooth implementation process and “get it right the first time” to foster confidence with your participants.

At PlanPILOT, our company is uniquely positioned to help you with these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Retirement for the American worker is a popular topic today, not only in the financial media, but also in the halls of Congress, where new legislation is continually considered to offer more retirement options, especially in employer-sponsored plans. The Pension Protection Act of 2006 and the SECURE 2.0 Act of 2022 are examples of bills that made significant changes and allowed for new features to be offered in retirement plans.

Bull’s-Eye on the Retirement Year

One of these changes is the increased inclusion of so-called “target-date funds” (TDFs). These investments have become a popular fund selection in employer plans since their introduction after 2006. As an example, Vanguard Funds reported that TDFs grew in their plans as the default choice for new-entry participants from 71% in 2013 to 90% in 2022. 

As about 20% of retired workers leave their accounts within their former employer’s plan, there has been a growing need to address the investment preferences and objectives of retired workers who do leave their money with the employer plan. Given the growth of deferrals flowing into TDFs and many participants continuing to leave their money in the 403(b) plan, some non-profit employers are selecting customized target-date solutions to accommodate the needs and objectives of these former employees.

Understanding Target-Date Funds

Target-date funds are specialized asset-allocation investments designed to relieve the investor of having to decide the asset allocation percentages between equities (stocks), fixed income (bonds), and cash/money market funds. As the investor approaches their intended retirement age, these allocations become automatically more conservative on the premise the investor becomes less risk tolerant. 

Depending upon the desired “target year” selected, the fund is structured and managed to “rebalance” the asset allocation based on the shrinking time horizon, so by the intended retirement age, the fund’s holdings generally reflect a less volatile (less risky), balanced allocation between equities and fixed income/cash. Yet even for the retired employee-participant, this allocation may be appropriate for some, but not others. Some retirees may wish further enhancements or selections to bolster diversification and lower risk.

Enhancing Investment Holdings for Retired Employees

Customization also includes examining the holdings and makeup of the target-date funds themselves. Even though the target-date year (at or near the retirement year of the participant) between two different fund families may be the same, the actual composition of the funds may be significantly different. To address the needs of post-retirement participants, employer plan sponsors are requesting customization of target funds that include non-core investments that may be only available in the particular fund. These include natural resource and other “real” assets, non-core fixed-income assets and other alternatives that may not be prudent to offer all plan participants.

Instead of customization of target-date funds, some plan sponsors have also begun to request more fixed-income investment choices for the plan menu, since most post-retirement participants naturally gravitate toward a greater allocation of less-volatile fixed income holdings as they age and are no longer working. In addition, as the percentage of post-retirement participants in a given 403(b) retirement plan increases, sponsors have recognized the benefits of providing a greater array of fixed income to both current employees and retired former employees.

Providing Secure Protected Lifetime Retirement Income

A significant feature also available today is the ability of the participant to annuitize a portion of their retirement account to create a dependable stream of lifetime income. The SECURE 2.0 Act allowed and encouraged employers to incorporate in-plan annuities as a feature of retirement plans.

Studies cited by Fidelity Investments (by the Employee Benefits Research Institute 2021 survey) indicate that 78% of workers would be interested in such a feature to ensure they don’t outlive their savings. Studies by notable retirement research specialists, such as Professor Wade Pfau, have demonstrated benefits of including a “protected lifetime income” can lower longevity risk and other risks of retirement finances. In a research paper on the benefits of annuities, Dr. Olivia S. Mitchell, Executive Director of the Pension Research Council at the Wharton School of Business, states that “most people would be better off if they had access to deferred income annuities in their …accounts….”

Implementing These Enhancements May Be Complex

Customization is an enticing concept, but usually also requires advanced expertise as to the pros and cons of implementing these features into an employer-sponsored retirement plan. With the increased focus on the plan sponsor’s fiduciary responsibility to participants, employers who lack such expertise are encouraged to utilize the knowledge and experience of retirement plan specialists to help design and implement these enhancements. 

At PlanPILOT, our company is uniquely positioned to help you with these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

When Shoeless Joe whispered, “If you build it, he will come…” to Ray Kinsella in the movie Field of Dreams, he was talking about a baseball field, not a retirement plan. Fortunately for Ray, it all worked out well—but not so much for many plan sponsors and their retirement plan participants today. In a 2022 study by LIMRA, a financial services research institute, 60% of retirement plan participants in the study felt that communications about their plan were “ineffective.” This lack of productive communication may lead to lower enrollment, indifference about plan benefits, and perhaps contribute to overall employee apathy, morale, and productivity issues.

Plan sponsors may feel that open enrollment lunch presentations, printed brochures at the HR office, or the occasional email message are sufficient, but how would they know? Are these employees showing up just for the free lunch? Do they scroll past the email amongst the hundred others they receive? How do you know you’re successfully reaching these participants in a way they understand and is meaningful to them about their retirement plan?

Get Started by Understanding Your Audience

Communications are the most effective when plan sponsors “meet employees where they are.” This means understanding different literacy levels and demographics of employees and structuring the mediums to match the comprehension levels of participant sub-groups. For example, how you might communicate with younger employees today (email, interactive video), may be quite different from methods used with senior employees (verbal, PowerPoint presentations, and printed literature). In addition, even participants within a group process information in different ways. Some are better suited to verbal explanations, others by illustration, video demonstrations, or graphic diagrams.

Experienced experts suggest using a multi-channel approach to reach as many participants within a diverse employee base as possible. Simultaneously utilizing webinars, email messages, videos, and live in-person presentations allows all participants the opportunity to engage with the plan representatives or consultants in a medium they understand and normally use in daily life.

Build Trust With Frequent Direct Communications

According to senior communication consultants, ineffective communication can leave employees confused and apprehensive about utilizing retirement plans and other benefits. In fact, behavior economists Richard Thaler & Cass Sunstein, in their book Nudge: The Final Edition (p. 13), suggest that people often make poor choices in a context where they are inexperienced, not well informed, and communication is slow and infrequent. 

The annual enrollment meeting or occasional email isn’t usually enough. Frequent communications, such as a monthly newsletter, may be more productive in allowing employees time to process information, follow up with questions or inquiries, and develop a greater comfort level with the materials and provisions. 

Other recommendations include establishing online focus groups or chat rooms, where participants can ask questions and receive input from other employees as well as discussion moderators. Such methods resemble social media threads or other online methods that employees use frequently. Moderators or plan sponsors can also monitor discussions to detect common and frequent questions; this can indicate areas where a lack of awareness or misunderstandings are prevalent and therefore where further explanation or clarification in plan materials is warranted. 

Measure Effectiveness

Plan sponsors may implement improved modes of communication with the best intentions, but knowing whether these initiatives are productive is crucial to success. As mentioned above, monitoring discussion group threads and encouraging feedback from participants could result in further insights. Monitoring and quantifying the actions participants take in response to communications (and whether appropriate choices were made) could help plan sponsors measure demographic trends, deficiencies in materials or messaging, and whether the information conveyed is fully understood by the employee audience and if the end objective is attained (e.g., emphasizing the benefits of long-term saving and investing in the retirement plan results in greater enrollment and payroll deferrals to the plan afterward).

Implement Modern Communication Techniques

As mentioned, people absorb and process information in different ways. While glossy fact sheets and brochures may still have their place, consider incorporating digital presentations with animation and graphics, interactive tools, and videos, all of which should be accessible via smartphones. Employees may not necessarily have personal computers or tablets, but they most likely have and use their smartphones. 

Consultants state that just like schoolchildren, adults may learn and assimilate information more easily if it’s presented in a fun, creative manner, and using elements found in social media could be useful as well. Other suggestions include using individual “life events” (work anniversaries, birthdays, or promotions) to send targeted messages about benefits that may be appropriate to that occasion.

Use the Team Approach

Oftentimes, plan sponsors or HR departments lack the technical information to properly disclose and explain specific plan features to employees in an understandable manner. Plan sponsors often state they’re the “employer,” not the benefit expert. Partnering with benefit consultants, who can provide the knowledge and skill and can simplify “jargon” into more common language, examples, and bite-sized snippets, may be an efficient means of ensuring the message gets across.

We’re Here to Help

For more information on retirement plan benefits, call us at (312) 973-4913 or email mark.olsen@PlanPILOT.com to discuss how we can help you implement or improve your retirement plan benefit program.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.