PLANADVISER - March/April 2021 - 28

plan design | solutions
help sponsors better understand the direct and indirect costs
of the plan and explain the value that happier, more engaged,
more productive and more loyal employees can provide. "
Poor Participation
A key goal of most sponsors is to drive employees' participation
in the plan and increase the amount that each one
contributes. For sponsors unhappy with plan participation,
advisers have plan design changes to suggest as a remedy.
" There are few times in life when you truly come across
silver bullets, " Patterson says. " Contemporary plan design
automatic features, combined with what we've learned
about human behavior, are truly silver bullets in retirement
savings. We've seen tremendous success in the past decade
from getting sponsors to make those changes. "
Instituting, or increasing, an employer match can make
a difference in both enrollment and the contribution amount
per participant. Still, it also can increase the plan's total cost.
Other effective options to consider, on their own or in combination,
are automatic enrollment, automatic escalation and
automatic re-enrollment. Saving rates in employer plans
with auto-enrollment are 56% higher than those in plans
without an auto-enrollment feature, a Vanguard study found.
How to Explain Plan Design
Changes to Participants
Evolving Best Practices
The industry is constantly evolving, offering new products
and studying the efficacy of existing ones. As research has
shown how effective financial wellness tools and autoenrollment
are, for instance, they have become much more
widely available for sponsors to employ. Less than 25%
used such a feature in 2005, but
more than 70% had adopted one
by 2018, a T. Rowe Price paper,
" Insights on Retirement, " shows.
Just as forward-thinking
ONCE A PLAN SPONSOR has decided to implement a plan design change,
whether a re-enrollment or the addition of a Roth conversion, a key to making
that change successful is coordinated messaging to advertise the new option.
Instead of using only standard recordkeeping messages, says Mike Shamburger,
of T. Rowe Price Retirement Plan Services, " I've seen better outcomes
when the recordkeeper, the financial adviser and the third-party administrator
[TPA] support the communication from the plan sponsor. "
Last year, such communication took place almost entirely online, as COVID19-related
social-distancing concerns made in-person meetings a rarity. While
not ideal, the forced shift to all-digital communication prompted many companies
to improve their online messaging to make it as engaging as possible.
While in-person educational sessions on plans will likely return-especially
for certain industries such as manufacturing-digital communications across
multiple platforms will also likely remain in place.
" Plan advisers should be thinking about what has worked in the past year, so
they can continue doing that if it helps participants engage in the process, " says
Kristin Bulat, of NFP. " We have the luxury of learning from the forced creativity
over the past year and cherry-picking the things that really worked well. "
Best practices include using as many channels as possible, including text
messages, social media, email and video communications. A sponsor that can
deliver customized messaging to individual participants, or interactive tools that
let them visualize how plan design changes could affect them, may see greater
uptake. The focus of communication should be not only on the plan design
change itself, but also on the advantages for participants, says Shamburger. -BB
advisers might have suggested
their clients adopt auto-enrollment,
they might now be stressing
increasingly popular features
such as in-plan Roth conversions
or in-plan annuities.
" You spend so much time
recruiting top employees, you
want to hold onto them, and sometimes
the best way is with the
401(k) or the defined contribution
[DC] plan, " says Dave Paulsen, a
senior adviser at Annexus Retirement
Solutions, in Scottsdale,
Arizona. " Now, we're seeing some
innovation in the industry for
getting people not just to retirement
but through retirement. "
For plan sponsors still not
sold on adjusting their plan,
their adviser can create models
to show the potential impact if
they did. This can coax the client
toward a decision, Workman says.
" The modeling can be powerful
in driving awareness ... for any
potential plan cost changes, in a
way that is actionable, " she says.
-Beth Braverman
Changing Demographics
As the makeup of an employer's workforce changes, so do its
financial priorities-and the features of a plan that might
serve it best. Advisers can discuss with plan sponsors their
employee demographics and how to design a plan that will
best meet the group's needs. Younger employees, for example,
or those living paycheck to paycheck, might benefit from
sidecar savings accounts, while a staff approaching retirement
might have more interest in lifetime income products
and learning about retirement withdrawal strategies.
" You have a finite employee benefit budget, so you want
to support the features that will help the people the most, "
Shamburger says. " That also demonstrates to employees
that the employer wants to provide the most value it can
for its associates. If it never makes changes to the plan, [the
plan] doesn't appear to be a priority. "
28 | planadviser.com March-April 2021
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PLANADVISER - March/April 2021

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