2015 RPAY – The Casey Retirement Group at Morgan Stanley

PA: What have you done in the past year to improve participants’ retirement readiness?

The Casey Retirement Group: Our team has constructed the informational architecture and education in such a way that participants are more likely to make good decisions. Richard Thaler from the University of Chicago calls it “libertarian paternalism.” This is an apt description because you want to give people a choice, but you don’t want to force them to do anything. We’ve applied the science of behavioral finance and have seen improvements in overall plan health. For example, a casino client initiated retroactive auto-enrollment with auto-increase, due to significant turnover and a transient population, as those things have made it a challenge for highly compensated employees (HCEs) to fully maximize their contributions. 

Since the change, the average deferral rate for this plan has grown from 3% to 7%, and average participation has grown from 35% to 75%. Not only has this change, combined with the company match, helped non-HCEs to save more, but it has also resulted in a decrease in returns of excess contributions. However, the plan still does not pass discrimination testing; therefore, we recommended a nonqualified deferred compensation (NQDC) plan that provides for return of excess contributions to flow directly to the NQDC plan. Non-HCEs are saving more, and HCEs have a solution for their needs. All participants in the plan can get on track to a dignified retirement.

PA: As a retirement plan adviser, what do you take the most pride in?

CRG: More than ever, the education, information and tools we provide to help participants secure their retirement; such efforts might have the greatest impact on their lives. It is truly rewarding for our team to see participant behavior positively change, even though they may not be aware of the full impact on their lives until years later. We hope someday, upon retirement, they will look back and reflect on the moment when the importance of a dignified retirement became clear. 

PA: What are the most important issues your plan sponsors face with their company retirement plan, and what specific actions do you take to assist them in overcoming those issues?

CRG: Plan sponsors often place retirement benefits at the bottom of their priority list, not fully understanding the impact of their decision. On top of running a successful business, plan sponsors are now tasked with having a working understanding of Employee Retirement Income Security Act (ERISA), Department of Labor (DOL) and Internal Revenue Service (IRS) requirements. Juggling these duties while balancing fiduciary mandates and keeping plan costs low is difficult enough. Add to that the need to help participants reach their retirement goals, in order to maintain a healthy work force, and the need for professional advice becomes clear. 

However, the proper advice is equally important. Too often, we come across plans with an adviser who has been there for years but done nothing more than annual investment reviews. Participants need a professional in order to get answers to their questions and to help them get on the right path to build a secure retirement. We offer plan sponsors services designed to ease their fiduciary requirements by acting as an ERISA 3(21) fiduciary and providing investment advice or taking investment discretion as 3(38) investment manager. 

PA: What changes to your practice or service model do have planned for this year?

CRG: We plan on utilizing model portfolios more this year. The use of target-date funds (TDFs) has undoubtedly been a great innovation in overcoming many of the investment mistakes participants have made. However, limitations do exist during investment reviews. Replacing an underperforming target-date fund can often be burdensome to the plan sponsor and disruptive to plan participants. Underperformance may be due to only a specific asset class within the TDF. Offering model portfolios not only allows for more granular investment reviews but also can add a layer of risk tolerance in addition to retirement age.

BUSINESS AT A GLANCE

PLAN ASSETS UNDER ADVISEMENT: $350 million

MEDIAN PLAN SIZE (IN ASSETS): $25 million

TOTAL PLANS UNDER ADVISEMENT: 40

TOTAL PARTICIPANTS IN PLANS SERVED: 9,300

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