Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
May 20th, 2015
Benefits & Administration
Education Key to Prompting Participants to Save
When retirement plan providers take the time to educate participants about the importance of saving for retirement, this builds a level of trust that results in higher savings rates and the use of retirement planning tools, according to the National Association of Retirement Plan Participants’ (NARPP) second annual Retirement Plan Participant Financial Empowerment, Literacy and Trust (FELT) Study. The data shows that a provider’s education program and levels of trust are closely intertwined, says Laurie Rowley, NARPP’s co-founder and president. Education can create the necessary trust that encourages people to participate in the plan, increase their deferral rates, and use retirement planning tools and calculators, she says.Read more >
Failed Testing an Opportunity to Improve Retirement Plan
Failed nondiscrimination testing may mean a retirement plan is not designed to encourage workers to save enough. “The issuance of corrective distributions … means that the plan has highly compensated employees who were unable to save as much for their retirements with pre-tax income as they would like. It may also mean that the plan is not designed to encourage workers to contribute sufficiently,” says Eric Ryles, managing director of ALM Financial Intelligence.Read more >
Ask the Experts
“I am a benefits manager who recently became employed at a large nonprofit after having been in the corporate world. One of my first responsibilities was to review our existing vendor contracts. Much to my surprise, when it came time to review our Employee Retirement Income Security Act (ERISA) 403(b) plan, our vendor indicated that such contracts didn’t exist! They indicated that they have contracts with the plan participants, but not the employer. Could this be possible? For my prior employer’s 401(k) plan, we had a trust agreement, recordkeeping agreement and service agreement. It strikes me as odd that a 403(b) plan would have none of those things. Am I being unreasonable in my expectations?”Read more >