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Administration June 1, 2026
Education vs. Advice: The Difference Matters
Misinterpreting the distinction between the two could increase plan sponsors’ exposure to litigation or other risks.
Reported by
Beth Braverman
Art by Mar Hernandez
Between economic volatility, increased demand for personalized financial guidance and mandates from the SECURE 2.0 Act of 2022, plan sponsors in 2026 are experiencing heightened pressure to improve participant engagement and retirement readiness.
The Department of Labor has advised that education is designed to empower participants without crossing the line into formal investment recommendations. After federal courts earlier this year vacated the Retirement Security Rule established under former President Joe Biden, the standard for what is fiduciary advice reverted to a test from the 1970s.
However, research shows that both education and advice can help. According to a recent report from T. Rowe Price, its users who receive investment advice through a managed account or who engage with online participant education and tools saved at a rate 29% higher than nonusers and had twice the average account balance. The more participants use such resources, the higher their average savings rate.
“There is a need for participants to better understand all the plan features and how those plan features can help improve their retirement readiness,” says Ashwini Jambekar, head of defined contribution strategy and business enablement at PGIM.
Increasing participants’ use of education and advice often comes down to how plan sponsors communicate with their participants. Effective communication requires a combination of behavioral insights and tailored messaging.
“There is an opportunity now for plan sponsors to work with their providers to create very clear, easy-to-understand, personalized and accessible [communication] by which participants can feel more empowered and confident,” Jambekar says.
But to capture that opportunity, plan sponsors need to understand the distinction between actionable education and fiduciary advice.
What’s the Difference?
For many plan sponsors, education needs to start with the basics of how their plan works.
“The majority of plan participants are financially illiterate, and they don’t want to be [financially literate],” says Ron Surz, president of Target Date Solutions and PPCA Inc. “They just want to trust. So you can have all this great [education] out there, but if nobody’s looking at it, it doesn’t move the needle.”
Participants in 401(k) plans are often confused about key plan features, which can lead to missed opportunities for maximizing retirement savings. For example, 79% of plan participants recently surveyed by Charles Schwab believed they were getting their full employer matching contribution, but only 63% were.
“Especially with younger employees or those in the early part of their career, I think one of the biggest challenges is just getting their attention and getting them thinking about retirement,” says James Mullery, executive vice president and head of institutional relationship management at TIAA. “If you’re in your late 20s and early 30s, your retirement feels like it’s a million years away.”
Other participants need higher-level guidance. Less than one-third of active 401(k) plan participants reported being very confident in their ability to make future decisions about decumulation of their retirement savings and about the tax implications of how they take distributions without the help of an adviser, according to research from Cerulli. As education and guidance get more complicated—and personalized to an individuals’ situation—it may shift into advice territory.
It is critical that plan sponsors recognize the difference between investment education and fiduciary advice, as this directly determines their legal liability under the Employee Retirement Income Security Act. Misinterpreting this boundary could increase exposure to lawsuits or prompt prohibited transactions violations.
“Plan sponsors who hire financial coaches or wellness providers are usually clear that when you’re working with these financial advisers, they can help you make more personalized decisions,” says Megan Yost, a senior vice president for thought leadership and insights at the Segal Group in Boston. “That’s precisely why they offer that as a supplemental benefit to the retirement plan.”
General information or concepts to help participants make their own choices or understand their plans fall under education. Specific decisionmaking recommendations about investment funds or actions tailored to the participant and provided over time for a fee could be subject to the DOL’s five-part test for what is investment advice, established in 1975.
Fiduciary Responsibility
While some plans offer advice at any stage, some experts say it becomes more critical for older participants or those in the final stages of their careers.
“When we think about advice, it’s more about how you get people to retirement and what post-retirement is going to look like,” says Jeri Savage, retirement lead strategist at MFS Investment Management. “There’s not a single product that’s going to solve for that, because people have such unique and customized needs.”
Under ERISA, a provider that gets paid for advice or makes discretionary decisions about a participant’s funds is a fiduciary. If a provider gives advice, such as recommending specific investments or encouraging rollovers, they are responsible for the prudence of that advice and must act as a fiduciary. Even if a plan sponsor hires a third party to provide education, rather than advice, the selection and monitoring of that provider is still a fiduciary act that requires prudence on the part of the sponsor.
Even if educational materials are provided by a vendor, plan sponsors are still responsible for ensuring they are accurate and compliant.
“The plan sponsor should certainly review—and sometimes review with their counsel—the materials to ensure that there isn’t anything within the communications that could cause risk for the organization,” Yost says. “But most recordkeepers have very strict compliance processes, so that gives plan sponsors a lot of comfort.”
A Multi-Channel Approach
Regardless of the topic or whether they are offering education or advice, a challenge many plan sponsors face is that different age cohorts within their workforce want to receive communication in different ways. Younger workers tend to prefer mobile apps and short-form video, while older participants are more open to webinars, calculators and one-on-one support.
“Whether they’re starting up their career, balancing various priorities or looking to retire, clear communications can really go a long way in helping participants better take advantage of all the great plan design features that are put in place for them,” Jambekar says.
That requires plan sponsors taking a multi-channel approach to communication and may mean repurposing the same content for different audiences on different platforms.
“There’s no clear consensus on how people prefer to receive advice or information or communications in all of these different forms,” Savage says. “So as the plan sponsor, you almost have to commit to providing it in different ways in the hopes of meeting as many people as possible where they are.”
