A Plan Sponsor Chooses a Retirement Income Product

But, the Mayo Clinic saw a need among their 403(b) plan participants for which they wanted to find a solution.  Frank Allen, Office of Staff Services manager for the Mayo Clinic, said in the last six months the organization has wanted to add a retirement income solution for two reasons: the amount of advice participants are wanting about Social Security and retirement and employees’ desire for an annuity option.

According to Allen, Mayo Clinic does not have enough staff to do one-on-one meetings with employees. “Especially as employees get close to retirement, the organization wants to reach out to help them think about retirement income and learn about Social Security options,” Allen said, adding that the organization believes the best practice is full disclosure—offering an annuity but also letting participants know they have other options to generate retirement income.

After doing a search, Mayo Clinic adopted the Financial Engines managed account program in 2008. Allen said the fact Financial Engines was willing to be a co-fiduciary with the organization resonated with them. Also, Financial Engines is not owned by a mutual fund company; it is a standalone firm and unbiased, and Mayo Clinic was looking for as little conflict-of-interest as possible. In addition, according to Allen, since its founder is William F. Sharpe, it shows there is expertise behind the firm’s solutions (see “20/20 Vision: Financial Engines”).

The organization more recently added the Income+ solution for older employees. With Financial Engines, Mayo Clinic employees are getting one-on-one advice.  Income+ offers older participants a portfolio glide path for retirement.

The Income+ feature is available to participants in Financial Engines’ managed account program at no additional cost, and it does not require employers to add an annuity or change the fund line-up in their plan.  Additionally, as part of a managed account structure, it can continue to provide employers with a qualified default investment alternative (QDIA) safe harbor.  According to Financial Engines, the program gives employees control of their money, which stays in their 401(k) account and “doesn’t lock them into a particular investment or insurance product.”  Participants can start payouts, stop payouts, and take additional withdrawals at any time, and they can cancel at any time with no fee or penalty. See “Financial Engines Expands Solutions with Income Plus.”

Allen said 64% of Mayo Clinic employees have adopted the Financial Engines managed accounts solution, and Income+ is an additional lure for older employees who are not signed up for the service.

“Financial Engines’ [solution] is a tool, and how you use it determines how it helps participants,” he concluded.