September 9, 2022 is National 401(k) Day! To celebrate, we compiled four helpful ways Plan Sponsors can potentially improve outcomes for 401(k) plan participants.
1. Be mindful of fees.
One of the most effective ways to ensure your participants are saving more for retirement is having them pay less in fees. A periodic review of investment and recordkeeping fees can help uncover savings opportunities and will also leave a trail of good governance. Evaluating different ways to allocate fees across participant accounts (i.e., pro rata vs. per capita) may also help ensure fees are being paid equitably among all participants in your plan.
2. Consider offering advice to help your participants plan for their retirement.
Many participants are not expert investors, but they could benefit from working with an expert. Your plan recordkeeper likely offers two types of advice within the plan today, point in time non-discretionary advice and managed accounts. Point in time non-discretionary advice is often provided at no cost to a participant and there is no obligation to use the advice. This may be helpful for a participant who is looking to confirm their allocation or investment selections are appropriate given their circumstances. Managed Accounts is a discretionary advice offering with an additional fee. This may be helpful for a participant with a more complicated investment situation or someone who would prefer to be hands off when it comes to choosing an allocation and investments for their retirement plan. It is important to note that from a fiduciary perspective, advice and managed accounts should be prudently selected and monitored on an ongoing basis.
3. Get participants saving in your plan sooner.
While it has been many years since the Pension Protection Act of 2006 introduced automatic enrollment provisions, there are still nearly 40% of plans not using this valuable tool, and when in use, nearly 40% are not applying the provision retroactively (eligible but not participating in the plan).1 Similarly, just over 50% of plans are offering immediate eligibility (for employee contributions).1 As many participants have likely heard in a group education setting, “it’s time in the market that is most important.” Eliminating roadblocks to help participants have more time in the market to save and plan for retirement is critical.
4. Good governance leads to better outcomes.
Being a Plan Sponsor comes with many responsibilities and risks. One way to help mitigate risk is through a prudent process. Meeting regularly as a committee and following a process to evaluate the critical areas of your plan will help to ensure you are meeting your obligations as a plan fiduciary. Most importantly, it may lead to the best outcomes for your participants.
For more information on how to potentially help improve your participants’ retirement plan outcomes, please contact any of the professionals at Fiducient Advisors.
¹ Source: PSCA 64th Annual Survey of Profit Sharing and 401(k) Plans: Reflecting 2020 Plan Experience. Data as of December 15, 2021.
The information contained herein is confidential and the dissemination or distribution to any other person without the prior approval of Fiducient Advisors is strictly prohibited. Information has been obtained from sources believed to be reliable, though not independently verified. Any forecasts are hypothetical and represent future expectations and not actual return volatilities and correlations will differ from forecasts. This report does not represent a specific investment recommendation. The opinions and analysis expressed herein are based on Fiducient Advisor research and professional experience and are expressed as of the date of this report. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Past performance does not indicate future performance and there is risk of loss.
