Client Service June 27, 2017

Small 401(k)s Adopting Best Practice Plan Designs

In addition, Vanguard found an increasing influence of financial advisers catering to the small business 401(k) market.
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Small business defined contribution (DC) plan sponsors, like their large corporation counterparts, are increasingly implementing best-in-class design features to improve the retirement readiness of their employees, according to Vanguard’s fourth annual How America Saves: Small business edition, an extension of its How America Saves publication.

Vanguard researchers highlight several positive trends, including the growing adoption of automatic enrollment, target-date funds (TDFs), employer contributions, Roth options, and loan flexibility.

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Further supplementing these positive trends is the increasing influence of financial advisers catering to the small business 401(k) market. Advisers are counseling on plan design, investment selection and participant education, as well as providing Employee Retirement Income Security Act (ERISA) expertise and fiduciary support.

In 2016, small business 401(k) plans supported by Vanguard Retirement Plan Access (VRPA) featuring automatic enrollment strategies prompted an overall plan participation rate of 82%. In comparison, plans with voluntary enrollment reported an average participation rate of only 57%.

Nearly all VRPA plans have designated an automatic default fund, and 95% had selected a TDF as their default investment option last year. “Our research shows that nearly six in 10 VRPA participants were invested in a single TDF in 2016—a more than 75% increase since 2012,” says Jean Young, lead author of How America Saves: Small business edition.

In 2016, three-quarters of small business plan sponsors provided some type of contribution—either an employer match, non-elective contribution, or both. Taking into account both employee and employer contributions, the average total savings rate was 9.3% in 2016, with employer contributions representing more than one-quarter.

Small business plans are also increasingly offering a Roth option. In 2016, eight in 10 VRPA plans offered a Roth feature.

A third valuable plan feature that the majority of small business plan sponsors have implemented is the ability to take a loan from their 401(k) plans. In 2016, 70% of VRPA plans permitted participants to borrow from their plan.

The full report may be found here.
In Practice June 27, 2017

Cafaro Greenleaf Offers Investment Selection and Monitoring Report

The system engages fiduciaries and advisers throughout the process, allowing them to see their plan investments and understand why each fund is becoming more or less aligned with their needs.
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Advisory firm Cafaro Greenleaf launched its new reporting system, Fiduciary Fit.

The system will allow retirement plan fiduciaries to have access to the complete documented process of their investment selection and monitoring, and also provide clients with fiduciary protection. Documentation of the process includes an explanation of the patented rating methodology used to evaluate candidate investments, a record of key input parameters, and rating results. 

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Fiduciary Fit is customized to each fiduciary by incorporating both what is important to it and its plan’s unique demographics into the analytics. The system engages fiduciaries and advisers throughout the process, allowing them to see their plan investments and understand why each fund is becoming more or less aligned with their needs. 

Clients will be able to become completely involved in their investment process, to track the progress of their investments, as well as learn about them. The unique system provides clients with complete visibility of their funds, along with any investment risks throughout the process. In addition, clients will receive quarterly reports that rate all of their investments and the entire plan. 

Jamie Greenleaf, Cafaro Greenleaf’s lead adviser and principal says, “When an individual goes to a financial planner, [the planner] asks lots of questions to understand [the person’s] needs. This enables [him] to design the most appropriate investment recommendations specific to [the] individual. The next generation of selection and monitoring investments for retirement plans should also strive to provide the same level of diligence for plans. We are excited to present our clients with Fiduciary Fit to engage them throughout their investment process!”

To request a demonstration, contact Brian Clark at bclark@cafarogreenleaf.com or call 800-401-4830.

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