Defined Contribution Plan Concerns for 2019

As 2018 comes to a close, plan sponsors will want to make sure they understand the current landscape in the retirement plan industry along with potential concerns they may face for the coming year. With more scrutiny over fiduciary roles, it is important to be pro-active and actionable. However, many sponsors don’t realize that there are greater responsibilities beyond setting up and maintaining the retirement plan program. We have outlined the common concerns for 2019 that plan sponsors share regarding their defined contribution plans.

Staying Compliant

With the uptick of litigation, compliance has become one of the biggest concerns for plan sponsors. Most sponsors have other business-related tasks to manage, so often they will delegate much of the development and oversight to external parties. In addition, complying with the constantly evolving legal and regulatory environment is complicated and requires ongoing compliance. Even a plan sponsor that has spent significant time and effort understanding the rules and regulations that must be met can fall victim to an incorrect procedure. Partnering with a qualified company for the design and management of your plan can be an effective and efficient way to mitigate compliance risks for plan sponsors. For adequate protection, it is often best to partner with a Registered Investment Advisor that acts in a fiduciary capacity in order to ensure a higher likelihood of thorough compliance.

Remaining Competitive and Sustainable

With low unemployment rates and rising wages, it is increasingly difficult to recruit and retain key employees. In order to remain competitive, sponsors should review their plan design and investment structure to meet their employees’ needs and maintain a plan that is deemed attractive. Sponsors should also look into the plan’s expenses and administration to confirm that participants are not overpaying. Changing or adjusting the plan for maximum benefit to everyone involved may be necessary. Plans that continue to cost more than they bring in are not viable for a company’s long-term future.

Addressing Low Participation Levels

Having a retirement plan program in place provides value for employees. However, while reviewing year-end numbers, sponsors find that many employees do not voluntarily enroll. This may be due to lack of financial education or it could be the complicated enrollment process preventing them from signing up. One of the ways to reduce this challenge is to adopt automatic enrollment. Then employees must take action to opt out of the plan, as opposed to opting in. This can help a plan sponsor to increase their participation rates for the plan, which can also raise that plan’s profitability from a required revenue perspective. Other methods to increase participation levels are implementing financial education, immediate eligibility, and employer match.

Ensuring Retirement Readiness

There is a huge concern that employees will be working past typical retirement age due to financial insecurity. According to the 2018 TIAA Plan Sponsor Survey, 75% of plan sponsors are concerned their employees are not saving enough, and 77% believe their employees will outlive their savings. With the trend of longer life expectancy, many do underestimate their savings requirement and risk outliving their resources. To combat their employees’ retirement challenge, sponsors need to develop strategies to encourage greater savings. Work with your plan provider to apply re-enrollment and automatic features in addition to leveraging education and retirement planning tools. Assessing which employees are inadequately prepared and developing tailored education programs will improve their retirement readiness.

Checking Every Fiduciary Liability Box

While the concerns listed are each important in their own matter, it all comes down to the bottom line – fiduciary responsibilities. Fiduciary liability is a vital part of being a plan sponsor. Without a thorough understanding of what this duty requires, a plan sponsor may miss important actions or information that could affect their interaction with their employees and the legality and viability of the plan they provide. By understanding fiduciary duties correctly, or by working with an external company that can manage the plan properly, plan sponsors reduce their levels of risk and raise their peace of mind.

Let PlanPILOT Help

If you are concerned about being able to effectively handle every task associated with sponsoring a plan, contact us today. Enlisting the help of a qualified retirement plan consultant is beneficial to plan sponsors and their plan participants. As an independent Registered Investment Advisor, PlanPILOT is not tied to any investment fund or record-keeper. We offer clients unbiased advice and assistance to control their retirement plan risks and deliver benefits effectively. Plan sponsors also rely on us to review fund lineups and provide scorecards of investments, highlighting any changes recommended. Feel free to contact us at (312) 973-4911 if you would like to learn how PlanPILOT can help with your retirement plan and plan participants.

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