THOUGHT LEADERSHIP

Plan Design First

How advisers can help plan sponsors and participants by prioritizing plan design initiatives
Diane Gallagher

What do plan sponsors want out of their retirement plans and their retirement plan advisers? In a recent survey of 310 plan sponsors with plan assets ranging from just under $25 million all the way to $100 million, American Century Investments® sought to find out. Diane Gallagher, Vice President of Defined Contribution Investment Only (DCIO) Practice Management, spoke with Alison Cooke Mintzer, editor-in-chief of PLANADVISER, about the results—some of which were surprising, but all of which revealed many opportunities for retirement plan advisers to expand their businesses and improve participant outcomes.

PA: What were the key takeaways from your recent survey of plan sponsors?

Gallagher: There were four main findings. First, plan sponsors viewed helping provide retirement security for their participants as a primary goal. That’s really encouraging news. Second, plan sponsors valued participant communication and education programs, yet at the same time, they were not happy with the results they were getting. Some of them acknowledged that these programs have fallen short of their expectations.

Thirdly, plan sponsors greatly underestimated how much intervention their participants actually wanted from them. We did a companion survey for participants, and found that most participants really wanted a default in place or to have guardrails set up.

Finally, with respect to advisers, plan sponsors counted on their expertise and looked to their advisers most commonly for fund selection and monitoring. However, they were increasingly looking to expand the areas in which advisers could contribute to improving the plan.

PA: Your survey found a great number of plan sponsors who believed that their corporate goal for their plan was to support participants in achieving a secure retirement, but they were not very confident that their employees would reach their retirement income goals. That being said, very few seemed concerned at all about their liability for participants not retiring. What did you take away from that?

Gallagher: Our survey respondents represented plans with assets up to $100 million. Most of the media coverage of the legal issues has been at the larger plan asset end of the market. Therefore, I think it could be a fair assumption that our respondents felt “that hasn’t happened to me, that’s not me.” Also, these individuals probably have responsibility for multiple benefits and wear several hats. The concern of a liability just may not be front and center right now. However, we do know that whether you’re talking about liability issues or progressive plan design, everything starts with larger plans and moves to smaller plans. At some point, it will be in their line of sight.

Overwhelmingly, plan sponsors called out retirement security as their top priority. Yet only 28% were actually measuring that consistently. What respondents most often measured—participation rate, deferring to the match, employee satisfaction—are easily attained; it requires a relatively low investment of time and resources to gather. Retirement readiness math is more complex. How do you calculate it consistently? Does your service provider proactively offer that projection? Does it include Social Security or not? If you have a defined benefit (DB) plan, how does that factor in? 

There’s a great opportunity here for advisers to provide insight into calculating­ retirement readiness projections and measuring it consistently for plans. Advisers can help provide the criteria to pull all the information together, working with the associated service providers as part of their offering.

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