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Also, now is the time when participants need help more than ever. There is value to having someone educate participants and help the plan reach its savings strategy, he added. When I received my own disclosures, I have to admit I thought it would be confusing for those not in the industry (most participants), and I noticed that the information that stuck out the most was the expense ratios of investments, listed in a chart on the very right hand column. Watt said this should lead to discussions, not a gut reaction. The fear is that participants will decide to simply move to the cheapest investments, but most of the cheapest are not well-diversified or generate lower long-term rates of return. “The mathematics clearly show that for most participants, it is better to save more than have lower fees when it comes to generating retirement income,” Kmak pointed out. Followup after participant fee disclosures is a good idea, perhaps even a necessity. The more information plan sponsors can provide participants that they can understand, the more comfortable they will be with retirement plan decisions, Watt contended. Having employee meetings soon would be a good idea. Watt also believes a website and some calculators will not do the trick; participants need more to make good savings and investing decisions. An adviser can help them with decisions and show them the benefit they are getting for their fees. That is why Security Benefit wanted to sound an alarm. Fee disclosures are a good thing, but the reaction should be a discussion around value. Racing to the lowest cost services and potentially leaving employees on their own is an unwise decision, Watt concluded.
Also, now is the time when participants need help more than ever. There is value to having someone educate participants and help the plan reach its savings strategy, he added.
When I received my own disclosures, I have to admit I thought it would be confusing for those not in the industry (most participants), and I noticed that the information that stuck out the most was the expense ratios of investments, listed in a chart on the very right hand column. Watt said this should lead to discussions, not a gut reaction. The fear is that participants will decide to simply move to the cheapest investments, but most of the cheapest are not well-diversified or generate lower long-term rates of return.
“The mathematics clearly show that for most participants, it is better to save more than have lower fees when it comes to generating retirement income,” Kmak pointed out.
Followup after participant fee disclosures is a good idea, perhaps even a necessity. The more information plan sponsors can provide participants that they can understand, the more comfortable they will be with retirement plan decisions, Watt contended. Having employee meetings soon would be a good idea.
Watt also believes a website and some calculators will not do the trick; participants need more to make good savings and investing decisions. An adviser can help them with decisions and show them the benefit they are getting for their fees.
Rebecca Mooreeditors@plansponsor.com