Best of PLANSPONSOR National Conference

Best of 2017 PLANSPONSOR National Conference events attract plan sponsors and retirement plan advisers across the country
In October and November, PLANSPONSOR, for the second year, hosted a road show of half-day events across the country, stopping in Chicago, Boston, New York City, Dallas and Newport Beach, California.

The event gave plan sponsors and retirement plan advisers who could not to attend the 2017 PLANSPONSOR National Conference (PSNC) in June the chance to sample some of its most popular topics. The agenda included a regulatory and litigation update; a session on best practices in plan design; panels on innovative fund lineup construction and financial wellness; and a discussion on new approaches to participant education and communication.

Speaking about plan design, Spencer Goldstein of Stone Street Equity noted that, while an automatic enrollment feature helps participants save, the benefit cannot fully satisfy their retirement savings needs. Participants saving at the default rate of 3% aren’t making a conscious decision to do that, he said. “Most don’t know they should be saving more, while others can’t save more.”

Goldstein stressed how automatic escalation can help participants reach a positive outcome in retirement saving—especially as he believes plan sponsors should implement that strategy at the maximum level.

Aside from plan design features, both Goldstein and Terry Dunne, senior vice president, managing director, Millennium Trust Co., advised sponsors to think “simple” when planning employee communications. Effective communication strategies begin with simple language and numbers, they said, and building on these, participants can progress to larger, more complex figures.

During meetings, “instead of talking for 25 minutes, give them two to three key [takeaways] they should use for goals,” Goldstein said. “How much should I have by the time I’m 45 years old for my 401(k) plan?”
When an individual switches jobs—whether willingly or through termination—human resource (HR) professionals should provide education, communicating the benefits and choices he will have, Dunne said.

When contacting terminated and/or missing participants, communication—with an emphasis on attentiveness—is imperative. Dunne explained that, whether or not a participant still works for a company, the plan sponsor remains a fiduciary and holds a responsibility for him. “If you’re not communicating well, you can actually be fined by the Department of Labor [DOL],” he said.

One choice in particular, Dunne stressed, should be considered first: Cashing out of a plan, like taking money out of retirement savings, can result in hefty taxes and penalties.

When an individual leaves a company and is given a distribution form explaining what can be done with his retirement plan account, the plan sponsor should not lead the list of options with a cash-out, he said. Instead, the list should present options that let the participant keep his savings tax-advantaged. “The last choice should be cash. There are things that can be done, but it’s about education, trying to identify well that the individual has choices.”

Participant education has evolved alongside plan design, agreed Strategic Retirement Group President David Hinderstein. But automatic plan designs do not negate the need for communications, he said. Plan sponsors “have to think about what [they]’re trying to focus on with the audience” and bring those goals to the recordkeeping provider. That firm can gather data about participant demographics for the plan sponsor to use in targeting communications.

Investment lineup construction is another area of focus for plan sponsors. The panels discussed target-date funds (TDFs), as that investment type has gathered sizeable retirement plan assets. Gabe Vincezo, portfolio consultant for John Hancock Investments, said one of the biggest trends seen today in TDF construction is use of open architecture. “If you think about the idea of building an investment portfolio, that’s clearly going to be advantageous,” he said.

Mike Stephens, also a portfolio consultant with John Hancock Investments, agreed, noting that, as target-date funds have become more complex, plan sponsors have many more criteria to examine such as the original “to vs. through” discussion, as well as one about active vs. passive underlying funds in the fund suite. Plan sponsors should consider the diversification of the underlying funds in the TDF, he said. “There are many ways to diversify. Look at the asset classes, from plain vanilla to all 15 asset classes, and alternative beta classes, although they may add cost.”

Jonathan Wilkinson, vice president and defined contributions investment only (DCIO) sales consultant at T. Rowe Price, noted how collective investment trusts (CITs) are gaining more attention due to a higher rate of transparency among providers and plan sponsors. Although the investment vehicle once seemed more opaque than did mutual funds—they are not governed by the SEC or do not show daily values in the newspaper or online finance sites—plan sponsors are increasingly comfortable with how CITs are governed and realize that participants can access daily pricing via their retirement plan accounts online. “It seems, a lot of the time, consultants are interested to discuss collective investment trusts with their clients to show that there is another pricing model they would be able to choose,” he said. “We’re seeing a new trend toward collective investment trusts.”

Panelists discussed further trends influencing fund lineup construction. Mary Beth Glotzbach, vice president, institutional DCIO, at Franklin Templeton Investments, addressed the topic of retirement income. Although there has been limited adoption of retirement income products, Franklin Templeton’s Retirement Income Strategies and Expectations (RISE) survey indicates that participants ages 40 through 50 worry about retirement. Therefore, Glotzbach said, this is a good time for plan sponsors to consider, and offer, retirement income products to help participants alleviate that concern.

As for how such concepts and investments fit into the retirement plan lineup, Glotzbach proposed something called a retirement tier. In it, she said, “are investments and tools such as a Social Security optimizer, a catch-up escalator and an annuity marketplace; it can include guidance. A retirement tier will give plan sponsors and participants a tool for retirement.”

Another hot topic addressed at the conference was financial wellness. While this has become a set of buzzwords in the industry, most people using the term fail to agree on how to define it or what the deliverables are.

Jania Stout, practice leader, co-founder, Fiduciary Plan Advisors, said, “[Traditionally,] the plan sponsor’s thinking was that all participants’ savings should go into their 401(k) and their retirement plan should always be their No. 1 priority.” But, she said, participants also need to be financially prepared for emergencies, and plan sponsors are realizing that employee financial stress can have negative implications for the company as a whole, which is driving interest in helping participants understand their broader financial picture.

According to Nathan Voris, managing director, strategy, at Charles Schwab & Co. Inc., the movement toward automation is helping to increase awareness about financial wellness, because it lets plan sponsors and providers engage the participants in more pressing financial topics, including creating an emergency fund, saving for college, managing student loan debt, saving for a house and, in some more complicated cases, planning wills and addressing other estate issues.

Plan sponsors, through their recordkeepers, are able to leverage all sorts of data, Voris noted. The recordkeeper has not only the census data from the plan sponsor, including gender, age, salary and marital status, but also the data from the retirement plan, such as deferral rates, and any interactions made with online tools or information. Leveraging these points allows recordkeepers and plan sponsors to intelligently set up communication and wellness resources. For example, Voris said, “If you are 52 and you aren’t maxing out contributions in your plan, why should you receive a catch-up contribution reminder? It may make sense legally, but why would you do that?” Any communications concerning broad financial topics, such as loans, emergency savings, etc., can be made more personal for different employee demographics.

For plan sponsors that want to use a third-party provider, Barbara Delaney, principal, StoneStreet Advisor Group, cited the growth of independent financial wellness providers in the marketplace and the variety of solutions available through them. Components can include individual assessments, webcasts and online tools, all of which can be customized and deployed to employees to meet individual needs.