Sponsors Not Offering Advice Look for Liability Shield

July 30, 2004 (PLANSPONSOR.com) - Half of the plan sponsors in a recent survey said they offered investment advice while most of those not featuring advice said they would add it if their firms were to be held harmless from fiduciary liability.

The Employer-Sponsored Investment Advice Survey found that 49% said their organizations offer advice to their DC participants. Most of those not offering advice said they would jump into the advice arena if benefits laws were changed to shield employers from fiduciary breach suits by unhappy participants or if fiduciary liability were restructured so that responsibility rested entirely with the provider of investment advice.

The survey, sponsored jointly by the Society for Human Resources Management (SHRM), WorldatWork, and the Employee Benefit Research Institute (EBRI), also found that the advice tends to be delivered in different ways depending on the employer’s size.

According to the survey, organizations providing retirement investment advice typically do so through online resources or via financial planners in person or by telephone. Three quarters (74%) of plan participants from small companies had access to investment advice, a much higher rate than at medium (51%) and large (42%) organizations, according to the survey.

An organization’s size also played a role in determining the investment advice mechanism. Large and medium-size employers most frequently utilize the Internet (72% and 60%, respectively); among the small employers, 63% provide access to a financial planner by telephone. Respondents also indicated that access in person or on the phone had a greater impact on employees’ investments decisions than did online investment advice.

Employees typically use investment when enrolling in a retirement investment plan, when they are nearing retirement, or during periods of market volatility. Approximately 56% of the surveyed HR professionals said their workers are either “very on track” or “somewhat on track” with retirement investment plans. Meanwhile, an overwhelming majority of respondents said that not offering investment advice to defined contribution plan participants has had an impact on the employees’ ability to prepare financially for retirement.

A majority (53%) of respondents said advice from plan service providers is free to plan participants, 23% said it is paid for by the employer, and 8% said it is paid by participants.

“This survey indicates that there is strong interest on the part of many employers to include retirement and financial planning on their list of tools that aid in employee attraction, retention and motivation,” said WorldatWork Executive Director Anne Ruddy. “The vital question for employers today is: what is the right mix of elements in the employer value proposition that can help both employer and employee achieve their long-term goals?”

Respondents included 801compensation and benefit specialists as well as human resource professionals