2019 RPAY – StoneStreet Equity, LLC

The team at StoneStreet Equity, in White Plains, New York, is driven by its pride in helping participants who have a diversity of job types, ages, backgrounds and levels of investment knowledge enjoy a secure retirement.

Last year, for example, StoneStreet helped a large regional bank client improve its participants’ retirement readiness through several key changes. The bank hired StoneStreet to consult on three main goals: 1) to merge its two large 401(k) plans after a recent acquisition; to perform a request for proposals (RFP) for its 401(k) recordkeeping services; and 3) to de-risk its defined benefit (DB) plan.

With these objectives in mind, StoneStreet conducted the RFP, resulting in a 75% reduction in the 401(k)’s recordkeeping fees. This created a savings of over $300,000 that went straight to the participants. In addition, the advisory group implemented automatic re-enrollments of non-deferring participants, which increased plan participation from 86% to 97% year over year.

The client’s plan already had automatic enrollment, but StoneStreet increased the deferral rate from 3% to 4% and added automatic escalation, up to 10%. For the DB plan participants, StoneStreet created an outreach program to educate them on the most tax-efficient options for receiving their benefits. And when it came to education, the firm worked with the 401(k) provider to conduct group and one-on-one meetings.

Reflecting on its overall client experience, the StoneStreet team sees two major issues facing plan sponsors. First, participants are unsure how to appropriately and effectively manage their 401(k) investments. Second, employees have financial needs that extend beyond the 401(k) plan.

To address the first issue, StoneStreet has been working with 401(k) providers to enhance their managed account solutions. “We believe participants in a managed account will make better investment and saving decisions, will be more engaged and will achieve better retirement outcomes,” says Spencer Goldstein, principal and chief investment officer (CIO) at the firm.

As for the second financial stressor, participants can find help through StoneStreet’s Financial Elements (F.E.) financial wellness program. Through F.E., participants can take advantage of a financial wellness website that provides guidance on topics including budgeting, credit card debt, student loans and retirement income planning. They also have the chance to speak with an FE mentor, who can help them set financial goals.

“Outbound calling, goal-setting, and follow-up calls are key differentiators that help participants overcome inertia,” says Goldstein.

StoneStreet is currently rolling out F.E. to a $50 million 401(k) plan that also has a $175 million employee stock ownership plan (ESOP). The plan sponsor’s goal is to help employees have a better understanding of their ESOP diversification opportunities, as well as the tax advantages of rolling this money into the 401(k) or an individual retirement account (IRA). StoneStreet’s F.E. mentors will contact all ESOP participants to provide guidance on their options.

StoneStreet has now implemented fee levelization for most of its plans, currently having 50 such plans under administration. This has reduced clients’ investment management costs by choosing the most efficient share class of each investment. In levelized pricing, “moving all share classes to zero revenue-sharing funds is often not the most efficient from a cost perspective,” Goldstein explains. This is because these funds oftentimes have higher investment management fees, so participants would benefit more from a different share class with a revenue credit and a lower investment management fee.

StoneStreet has also focused on fiduciary outsourcing, moving from 3(21) to 3(38) for many of its defined contribution (DC) and defined benefit clients. It has also transitioned Employee Retirement Income Security Act (ERISA) 3(16) responsibilities from several DC and DB clients to an independent third-party administrator (TPA).

“We view our role, first and foremost, as advocates for our plan sponsors and their employees,” Goldstein says. “As we work with recordkeepers and plan providers, we are constantly pursuing enhanced services and promoting best practices.” —Corie Hengst