Advisers Play Important Role for Health Care Industry Plans

More than seven in ten (71%) retirement plan sponsors in the health care industry utilize the services of an adviser, consultant or some other intermediary, according to a survey by Transamerica.

Transamerica Retirement Solutions’ report, “Retirement Plan Trends in Today’s Healthcare Market – 2014,” produced in partnership with the American Hospital Association, says these plan sponsors most commonly partner with investment advisers or securities brokers who work exclusively with retirement plans (32%) or with investment or benefits consultants who work primarily with retirement plans (29%).

Plan sponsors in the health care industry cited many responsibilities handled by their advisers, most commonly reviewing investment options (93%), explaining provider fees (86%), supporting investment provider due diligence (85%), and formulating an investment policy statement (81%). Seventy-three percent said their advisers assist them with the implementation of a fiduciary process, and 59% indicated advisers make plan design recommendations. Forty-one percent said their advisers act as a plan fiduciary.

“Thinking about the industry overall, and where we are headed given the increased and necessary focus on retirement readiness, we believe the adviser will become more proactive in working with plan sponsors, and even participants, to develop a retirement readiness plan, whether it be through education or other specific communications materials,” Brodie Wood, vice president and national practice leader for not-for-profit markets at Transamerica Retirement Solutions, tells PLANADVISER.

More than half (51%) of plan sponsors surveyed indicated advisers ensure participants have access to education, communication, asset allocation and counseling, and 46% said they meet with employees one-on-one to provide retirement plan guidance.

The survey found defined contribution plan sponsors in the health care industry are making adjustments to plan design that can help employees achieve retirement goals. They are also implementing programs that address the challenge of employee engagement (see “Health Care Organizations Addressing Retirement Plan Engagement”). Seventy-five percent of sponsors surveyed said motivating employees to save adequately is the biggest challenge of managing a retirement plan.

In addition to utilizing advisers and consultants, about half (47%) of plan sponsors in the health care industry utilize the services of an onsite representative (consistent with prior years). The onsite representatives are most likely to be part-time (62%) although many are full-time (38%). Wood explains that the onsite representatives referred to in the report are dedicated on-site retirement plan provider representatives from multiple providers, not just Transamerica.

According to the report, onsite representatives provide critical support in helping health care industry plan participants improve their financial preparation for retirement. Nearly all onsite representatives (97%) meet one-on-one with employees. Ninety-two percent help employees and participants understand the plan, and 81% work to enhance the retirement readiness of participants. Seventy-six percent are focused directly on enhancing participants’ overall financial wellness, and 76% improve participants’ appreciation of the plan.

Onsite representatives help employees at both ends of the retirement planning spectrum, in that 65% are responsible for enrolling employees into the plan, and 65% are responsible for providing retirement income planning support.

How Advisers Get Paid

Advisers to retirement plan sponsors in the health care industry are most likely to be compensated via hard-dollar fees (46%, up from 36% in 2012) versus asset-based fees (27%, up from 19% in 2012). When asset-based fees are used, the most common fee range is less than five basis points (50%, down from 57% in 2012). Asset-based fees in the five to ten basis points range, while less common, are trending up (29%, increased from 21% in 2012).

Adviser compensation is most commonly paid via expense/Employee Retirement Income Security Act (ERISA) budget accounts (38%, up slightly from 2012) or via direct billing (36%, down from 52% in 2012). Other compensation methods—most likely hybrid arrangements— are on the rise, at 26% (up from 12% in 2012).

According to the report, compensation for onsite representatives is most likely to be salary plus bonus (83%, increased from 73% in 2012). Compensation based on commission is decreasing in prevalence (7%, versus 16% in 2012). Ten percent of onsite representatives are compensated via a hybrid arrangement of salary/bonus plus commission. “We don’t go into specifics regarding what they are selling for which they may get paid a commission, or from whom they get paid,” Wood says.

The research reveals trends for defined benefit plans offered by health care organizations as well (see “More Health Care Organizations Bundling DB Plan Services”).

To request a copy of the full report on "Retirement Plan Trends in Today’s Healthcare Market - 2014," send an email request to