Best Interest in Mind
Now that the U.S. 5th Circuit Court of Appeals has vacated the Department of Labor (DOL)’s revised fiduciary rule, we thought it would be important to explore plan sponsors’ expectations of how, going forward, retirement plan advisers will advise on whether to roll money out of a defined contribution (DC) plan into an individual retirement account (IRA) or keep it in the plan. Not surprisingly, “The Roll of the Adviser” found that many sponsors, particularly large ones, will likely scrutinize whether advisers are keeping participants’ best interests in mind. While sponsors and participants may benefit from the economics of keeping retirees’ assets in the plan, especially when it comes to negotiating fees, there can be a downside for the plan sponsor.
For one thing, there’s the difficulty of reaching retirees who have since moved or divorced. Further, sources question whether a sponsor that encourages retirees to remain in the plan has an obligation to offer systematic withdrawals and/or retirement income options.
Our annual PLANADVISER Recordkeeper Services Guide (formerly Recordkeeping Survey) gives a snapshot of the overall recordkeeping industry, as well as details on providers to show how these vendors work with advisers. The accompanying story, “Keeping Up with the Intermediaries,” discusses how recordkeepers are spending more time and resources on data analytics to make specific recommendations to plan sponsors on how to tailor plan design and participant communications. Also, many of the tools they offer, such as calculators, are now more intuitive, built with algorithms.
“Stretching the Match” reveals that, while only 30.3% of defined contribution plan sponsors use a stretch match, it can be a very effective way to motivate workers to save more, because they view that target as a recommendation on how much they should be saving. But if a sponsor does turn to a stretch match, it’s important to educate participants on how it works. Additionally, the stretch match formulas can be paired with automatic enrollment and automatic deferral escalation to get participants to save to the match amount or beyond.
“Speaking Their Language” examines the different sets of issues that resonate with Millennials, Generation X and Baby Boomers, respectively. Many Millennials are saddled with student loan debt and need help budgeting; having entered the work force when the Great Recession gripped the country, they are risk-averse and need coaching to achieve the appropriate asset allocations. Gen Xers may be caring for aging parents and struggling to save for their children’s college education, both of which efforts could trip them up when it comes to retirement saving; advisers need to remind them of the importance of that. Boomers need help with decumulation.
Other articles in this issue feature the topics of student loan debt relief and managed accounts. “Giving Them a Break” reveals how student loan debt relief programs can help get workers into a retirement plan many years earlier than they would have joined one otherwise. “Managed Accounts’ Value” examines who are the best candidates for these vehicles, how they can be set up to work the best, and what advisers should consider when selecting a managed account for a sponsor.
We would love to hear your feedback on these stories—and to hear from you on topics you would like us to cover.