Plan Sponsor Priorities for 2024: A Seven-Item Checklist

Outlined contribution (DC) plans are among the many most typical methods for US employees to avoid wasting for retirement. US DC plan applications totaled $9.6 trillion in belongings as of the third quarter of 2023 after they represented 22% of all US retirement belongings. This creates large duty for plan sponsors as they supply and handle retirement advantages on behalf of their staff.

To assist plan sponsors, we curated seven matters that we consider they need to make prime priorities for his or her retirement applications in 2024.

1. Full a Complete Goal Date Fund (TDF) Overview

Goal date funds (TDFs) are a distinguishing characteristic of DC plans: 85% of plan sponsors provide them. These funds routinely rebalance to develop into extra conservative as members close to retirement. Because of this, TDFs enchantment each to plan members looking for a hands-off method to managing their retirement financial savings and to plan sponsors that use such funds as their plan’s certified default funding different (QDIA).

The truth is, of the 80% of plans with a QDIA, 86% of them use a TDF. In consequence, plan members typically have their complete account balances invested in a TDF. This makes a robust choice course of in addition to diligent and ongoing monitoring completely important.

The US Division of Labor’s (DOL’s) steering “Goal Date Retirement Funds — Ideas for ERISA Plan Fiduciaries” outlines TDF choice finest practices. Plan sponsors ought to evaluate the entire steering earlier than evaluating their TDF. In our personal studying of the steering, we recognized three essential questions that plan sponsors ought to ask themselves. Collectively, they function a litmus check to find out if a TDF evaluate is likely to be warranted sooner quite than later:

Did your preliminary evaluation of funding choices contemplate your company-specific workforce demographics?

Did your preliminary evaluation embrace an analysis of a number of TDFs?

Have you ever reviewed your TDF choice, past regular efficiency monitoring, inside the final three years?

If the reply to any of those questions is not any, plan sponsors could wish to prioritize a TDF evaluate in 2024.

2. Trending and Stylish vs. Helpful and Vital

Articles, convention classes, and webinars that herald new concepts that can make DC plans “higher” could be distracting and infrequently blur the road between advertising and marketing and thought management.

For example, traditionally, most retirement planning communications have emphasised accumulation. Up to now two years, they’ve expanded to “decumulation” methods that concentrate on what occurs after retirement. This has created a wave of sponsored content material selling in-plan annuity or “lifetime earnings merchandise.” Regardless of the supposed recognition of such merchandise, solely 9.9% of plans truly provide them to their plan members.

The trade is within the midst of a fast innovation cycle propelled by the Setting Each Neighborhood Up for Retirement Enhancement (SECURE) 2.0 Act of 2022, elevated competitors amongst service and product suppliers, and different secular tendencies. It’s an thrilling time, and far of what’s being developed could serve plan members effectively sooner or later. However plan sponsors have to take care of their self-discipline and embrace a holistic, goals-based method after they consider trending DC plan merchandise, options, and options.

3. Provide Complete Worker Monetary Schooling Assets

To recruit and retain prime expertise, plan sponsors should customise their monetary training technique to the wants of a various and evolving workforce. Totally different generations of employees have interaction with instructional content material in several methods: Some want in-person conferences, movies and articles, or one-on-one classes. What resonates with somebody early of their profession could not work for somebody approaching retirement. In consequence, plan sponsors should goal, differentiate, and range their training strategies to have interaction all their staff.

A well-managed retirement plan supplemented by complete monetary training sources could be a vital recruiting and retention device. Our purchasers have loved the best success when our worker training consultants work with our retirement plan advisers to construct annual training campaigns that incorporate the various wants of their staff. A bit of little bit of planning goes a great distance in bettering participation, engagement, deferral charges, and different essential metrics.

4. Concentrate on Holistic Monetary Wellness

Final 12 months, inflation and the specter of a looming recession had been prime of thoughts for a lot of Individuals. Three statistics from a current PNC survey of firms and their staff emphasize this:

Seven in ten staff reported feeling monetary strain that negatively impacted their work.

Three of 4 employers reported that staff’ monetary stress affected operations, resulting in lowered productiveness, decrease morale, and decreased efficiency.

Practically one in 4 (23%) survey members spoke with a monetary adviser within the earlier three years.

Plan sponsors will help staff with their monetary well-being by making their retirement plans greater than only a car for saving. A nuanced emphasis on monetary wellness can’t solely enhance worker monetary well being but additionally foster better productiveness and expertise retention. Offering entry to group training classes through the workday, encouraging using calculators and different on-line recordkeeper instruments, and facilitating particular person consultations with monetary educators are all useful steps.

5. Consider Your Recordkeeper

The recordkeeper trade is quickly consolidating whereas struggling to maintain up with a extremely lively regulatory setting. Whereas some recordkeepers are assembly the problem, others are falling behind. As a part of their fiduciary responsibility, plan sponsors should usually consider suppliers on two key dimensions:

Providers and Merchandise. Plan sponsors analyze the providers rendered to find out in the event that they want enchancment. For a recordkeeper’s participant web site, amongst different merchandise, plan sponsors would possibly survey members and even personally check the expertise. They need to doc these findings as a part of evaluate conferences at the least yearly and save them in a fiduciary file for future reference.

Charges. A great payment analysis course of compares what a plan fees relative to different plans of comparable measurement in belongings and members that present related providers to an identical variety of individuals. We have interaction an unbiased payment benchmarking service to offer this data to our purchasers that they’ll then save of their fiduciary file.

If recordkeeping relationships are usually not assembly their requirements, plan sponsors ought to discover whether or not different suppliers are higher suits.

6. Defend Cyber Safety

Because the quantity and class of cyberattacks improve, organizations are educating themselves on how finest to guard themselves in opposition to fraud. Final 12 months, 88.2% of DC plans initiated cyber safety actions. Plan sponsors and members want to remain updated on the DOL’s cyber safety steering. For plan sponsors, the DOL’s “Cybersecurity Program Finest Practices” is a useful place to begin.

The DOL steering highlights plan knowledge as a central concern. We advocate plan sponsors consider their inside finest practices in addition to these of recordkeepers and different plan distributors.

Plan sponsors ought to contemplate asking their suppliers yearly for details about their cybersecurity practices. Reviewing and documenting that knowledge and storing it in a fiduciary file is an easy finest observe to implement. Plan sponsors would possibly take it one step additional and work with their recordkeeper to distribute participant-focused communications to enhance digital hygiene. In our expertise, calls to enhance cybersecurity practices have an additional advantage: They encourage plan members to log in to their accounts and interact with their retirement plans.

7. Governance and Compliance Refocus

The SECURE 2.0 Act of 2022 obtained detailed protection in 2023 and drew appreciable consideration and bandwidth all year long — typically on the expense of different initiatives and finest practices. Plan sponsors could have postponed evaluating the recordkeeping panorama, conducting a TDF evaluate, or analyzing plan design relative to opponents, amongst different initiatives.

The excellent news is that getting again on observe is straightforward. Plan sponsors ought to set up their aims and set deadlines to make sure they’re taking steps to fulfill them. We advocate plan sponsors construct a 2024 guidelines with their adviser and get to work on checking off the packing containers as quickly as attainable.

Conclusion

Plan sponsors serve a vital function in managing retirement applications in a approach that helps create optimistic retirement outcomes for plan members.

By protecting these seven priorities entrance of thoughts, plan sponsors can focus their efforts the place they’ve the potential to do probably the most good.

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