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Retirement Plan Solutions That Strengthen Your Business

Defined contribution plans are becoming an increasingly large part of a well-planned retirement. Recently, a reputable global risk management company suggested that there are nine 401k plan issues that employers and participants will confront in 2019. The trends for employers focus on compliance, litigation and workforce concerns. The participant issues include retiring later, saving too little, and confusing investment choices, with suggested solutions for each. My experience as a plan advisor tells me that all these issues are fundamental threats to a company’s health, productivity and future. Employee retirement readiness, talent attraction and retention, administrative burden and legal risk are fundamental aspects of business growth and success. Shouldn’t the company act to solve these problems and protect itself at the same time? The good news is that a 401k plan offering a professionally managed solution can address these risks for employers and employees.

Four Threats To Productivity

Four anticipated developments in 2019 are threats to workforce productivity and engagement. However, a plan advisor who designs and oversees a 401k plan with managed service can replace these hazards with solutions for an employer:

  • Employee longevity: Workers who haven’t saved enough before the standard retirement age may continue working because they can’t afford to retire. As a result, they become more expensive to insure, may have less passion for the job and impede the natural turnover in the company, limiting growth options for other staff. Litigious employees may decide that the reason they don’t have enough savings is the employer’s and plan’s fault.
    • Solution: A 401k plan offering a professionally managed solution can do nearly everything for an employee. The plan’s advisor can help workers set their retirement savings goal and remind them to keep saving more over time to meet that goal so they can retire as planned.
  • Struggling to attract and retain top talent: Competition for talent is fierce. The unemployment rate is the lowest it’s been in decades. There are more job openings than people, and wages are rising as a result. Human resources departments are even reporting that new hires are ghosting them by accepting other job offers — not showing up or even responding to calls. Talent is a hot commodity and employees are savvy about their worth and compensation.
    • Solution: Salary is important, of course, but today’s workers are also aware of how important a solid retirement savings plan is for their future. Just having a 401k plan with matching funds isn’t enough anymore. The best talent will seek out the best benefits, including the best retirement plan, and will choose the company whose 401k plan:
      • gives them confidence that their retirement is on track,
      • that doesn’t force them to make their own investment decisions, and
      • prioritizes employee education on financial health, taxes, and disbursement
  • Plan sponsor burden: The typical plan sponsor is often a human resource professional as well, having a full complement of related duties. Being a plan sponsor (and fiduciary), adds further responsibilities, such as plan design and investment decisions and plan administration responsibilities, including offering enrollment, capturing contributions, monitoring eligibility and providing education. Don’t forget about compliance responsibilities, benchmarking the plan and meeting with the investment committee. It’s easy to see how a busy plan sponsor might be reluctant to make changes that could make a good plan even better. As defined benefit plans get more complex, the weight of the plan sponsor role gets heavier.
    • Solution: Working with a plan advisor who takes on fiduciary responsibility and acts as an advocate for the plan with the provider eases the plan sponsor’s burden dramatically. The right plan advisor handles the plan, employee obligations, legal and regulatory commitments and fiduciary responsibilities. The plan sponsor need only to work with the advisor and investment committee and then can focus on his or her primary job duties. The plan advisor provides the expertise, relieving the sponsor from having to stay current on a changing and complex field. The company and its employees gain the best possible plan with the least amount of risk and uncertainly.
  • Employer legal risk: As retirement plans get bigger, offer more options and are governed by more complex laws and regulations, the potential for exposure increases. A single plan sponsor and investment or oversight committee with ‘regular’ jobs to perform can’t possibly keep up. Risk mitigation requires consistent monitoring and adaptation to the changing retirement plan ecosystem. Yes, the plan sponsor is the fiduciary, but the employer will be the target of any lawsuits filed by employees or penalties levied by the IRS or Department of Labor. The bad publicity that accompanies even honest mistakes can impair a business’s ability to compete for customers and workers.
    • Solution: Engage a plan advisor who uses their expertise to keep a retirement plan compliant, employees on target for retirement and the provider on their toes. An advisor who spends 100 percent of their time evaluating plans, making changes and staying current on regulatory oversight is simply more efficient and informed than a plan sponsor who is juggling competing duties. Adding the right advisor and plan can keep an employer on the right side of the ever-changing law.

Solutions That Strengthen

As you can see, there are many ways to reduce the predicted pressure and risk on employers that stem from retirement plan trends. A traditional 401k plan offers no resolution to immediate issues, while neglecting retirement saving to cover present needs just pushes the crisis down the road. Fortunately, a solution for employers that can ease some of the problems that employees face can also make the company stronger and safer. A 401k plan that offers a managed solution, a fiduciary plan advisor, and robust employee financial education can make lemonade out of these potential lemons.