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What are 401k Plan Sponsors Interested in Most Right Now?

What are 401k Plan Sponsors Interested in Most Right Now?
July 16
00:03 2019

It’s the summer. You’re busy. You’re busy thinking about summer things. We don’t want to get in the way of this fruitful contemplation, so we’ll cut right to the chase. Here are five issues 401k plan sponsors are interested in most right now. This list contains six items. You’ll have to read it to discover why.

Most Important Issue #1: The Bottom-Line of Their Business
Face it, the retirement plan doesn’t put bread on the table. The underlying business feeds everyone. Plan sponsors can’t be blamed if that’s their priority. Derek S. Taddei, Client Services – 401k Plan Marketplace at Stellar Capital Management in Phoenix, Arizona, says they don’t want to be “over consumed with the management of an employee benefit, when there is a business to run.Without a viable business there are no employee benefits.”

Most Important Issue #2: The Bottom-Line of Their Plan
Of course, when attention does turn to the plan, it’s KISS, KISS, KISS (as in, “Keep It Straight and Simple”). Again, this is related to the above issue. Keeping things straight and simple allows smaller companies to focus on the business without ignoring the plan. “Leveraging services to make administration easier,” says Jairo Gomez, the Director of Retirement Plan Services at Allworth Financial, formally Hanson McClain Advisors, a California-based financial advising firm. “Someone that can handle notices, track eligibility, automatically make changes to investments, etc.”

This may be obvious for smaller companies, but don’t be surprised to find this interest in larger firms, too. “There was a time in my business that I worked to implement plans and also served on the board of a large plan who was making changes on their current plan,” says Richard Reyes of The Financial Quarterback in Lake Mary, Florida. “Plans at the employer level are managed by HR people. Quite often (98.9%) these individuals have ZERO idea what fiduciary means or even cares. They just want to complete the task at hand and pick a name people know and can trust and an institution that can easily transfer the existing assets without bothering the HR person too much.”

Most Important Issue #3: Avoiding Liability
This perennial favorite says it all. It represents the underlying fear of all 401k plan sponsors. It’s probably also related to a bit of the Imposter Syndrome. After all, most plan sponsors aren’t experts in retirement plans. As self-identified amateurs, it’s not what they don’t know that scares them, it’s what they don’t know they don’t know that scares them most. According to David S. Thomas Jr., CEO at Equitas Capital Advisors, LLC in New Orleans, Louisiana, their primary objective is “avoiding liability, making the annoyance of the 401k lower, not being bothered by this non-revenue generating problem.”

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Most Important Issue #4: Employee Engagement
Once they settle into their role as plan sponsor, the full meaning of their fiduciary duty becomes clear. These plan sponsors realize they are more than button-pushers, they are docents that guide their employees towards a comfortable retirement. First and foremost, then, is “increasing participation,” says John C. Hughes, an ERISA/benefits attorney with Hawley Troxell in Boise, Idaho. “I believe this interest is primarily driven by the input employers are receiving from their consultants and recordkeepers, which in turn appeals to employer’s sense of paternalism.”

But it goes beyond this. It also means discovering methods to bring the employee into an active process that reveals their own best interest. This means teaching them to fish, not merely feeding them the fish. These plan sponsors are interested in “boosting participant engagement and providing stronger investment line ups,” says Faith Keith, CEO of Leverage Retirement, Inc. in Allen, Texas.

Most Important Issue #5: Fees
Jeffrey Burg, Partner at DB Financial Partners in Phoenix, Arizona, says, “Expenses, especially those that are paid by plan participants, still seem to be at the forefront of most plan sponsor’s minds.” How could plan sponsors not be concerned about fees. Between articles and law suits and articles about law suits, there’s an incessant rain of fee fear mongering. Plan sponsors are not immune from this message. In as sense, it also feeds the liability concern.

Most Important Issue #6: What? Me Worry?
How could a list of five issues 401k plan sponsors are most interested in right now contain six items? Because the Item #6 exposes a truth more revealing than all the others. “Unfortunately, many plan sponsors are somewhat numb relative to their plan,” says Chris Shankle, Senior Vice President at Argent Retirement Plan Advisors in Shreveport, Louisiana. “With exception for some recent volatility, we continue one of the strongest markets seen in some time. With strong market returns, poor performance or high fees are hard for plan sponsors to appreciate.”

So, it’s mid-summer. Go to the beach. Take your family on vacation. And forget about your worries.

But not for too long.

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary SolutionsHey! What’s My Number? How to Improve the Odds You Will Retire in Comfort, From Cradle to Retirement: The Child IRA, and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on TwitterFacebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

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