PLANADVISER - November/December 2017 - 54
servicing strategies
Aggressive Plan Design
S
pecialist retirement plan advisers know full well what
a robust plan looks like-it leverages the basic principles
of behavioral finance and choice architecture to
turn participants' inertia into a tool for their own benefit.
At minimum, a robust plan automatically enrolls most, if
not all, employees at a meaningful deferral rate, well above
3%; automatically escalates their contributions by 1% or
2% a year up to a cap of 10% or 15%; automatically diversifies
and rebalances their portfolio; and limits the number
and total value of loans that may be drawn against their
account balance.
While the formula is fairly simple, some plan sponsors
resist discussions about aggressive plan design, due
to misconceptions. Their arguments are likely familiar to
any experienced defined contribution (DC) plan adviser
and include unease about the potential to over-control
employees' finances and, among other concerns, about the
increased cost of matching larger contributions.
One of the most powerful messages to deliver to timid
plan sponsors, according to Joe Ready, head of Wells Fargo
Institutional Retirement and Trust in Charlotte, North
A strong retirement system benefits everyone in the U.S. economy
Carolina, is that they " can't afford to not invest in their
employees' retirement. " The extent to which an employer is
able to smoothly transition workers into retirement directly
affects a company's bottom line, through various pathways
such as health care premiums and the development of the
next generation of talent, to name only two critical factors.
Data provided by Prudential Financial underscores this
point. In its report " Why Employers Should Care About the
Cost of Delayed Retirements, " Prudential found that, for each
individual unable to retire at the traditional age, the additional
cost to the employer averages $50,000 a year-primarily
the difference between an older worker's salary at retirement
age and what a younger person stepping up to replace him
would earn. It goes without saying that older workers generally
are more experienced and mature than their younger
counterparts, potentially justifying their greater salaries,
but, Prudential's survey data reveals, the annual excess cost
of salaries and benefits across a work force is an additional
1.0% to 1.5% a year.
Prudential's analysis considers a company with 3,000
employees and work force costs of $200 million. A one-year
54 | planadviser.com november-december 2017 Art by Leo Espinosa
http://www.planadviser.com
PLANADVISER - November/December 2017
Table of Contents for the Digital Edition of PLANADVISER - November/December 2017
The Next Step
2017 PLANADVISER National Conference
2017 Practice Benchmarking Survey
Aggressive Plan Design
Professional Groups
The Value of Fixed Income
PLANADVISER - November/December 2017 - C1
PLANADVISER - November/December 2017 - FC1
PLANADVISER - November/December 2017 - FC2
PLANADVISER - November/December 2017 - C2
PLANADVISER - November/December 2017 - 1
PLANADVISER - November/December 2017 - 2
PLANADVISER - November/December 2017 - 3
PLANADVISER - November/December 2017 - 4
PLANADVISER - November/December 2017 - 5
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PLANADVISER - November/December 2017 - 27
PLANADVISER - November/December 2017 - 28
PLANADVISER - November/December 2017 - 29
PLANADVISER - November/December 2017 - The Next Step
PLANADVISER - November/December 2017 - 31
PLANADVISER - November/December 2017 - 32
PLANADVISER - November/December 2017 - 33
PLANADVISER - November/December 2017 - 2017 PLANADVISER National Conference
PLANADVISER - November/December 2017 - 35
PLANADVISER - November/December 2017 - 36
PLANADVISER - November/December 2017 - 37
PLANADVISER - November/December 2017 - 38
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PLANADVISER - November/December 2017 - 43
PLANADVISER - November/December 2017 - 44
PLANADVISER - November/December 2017 - 45
PLANADVISER - November/December 2017 - 2017 Practice Benchmarking Survey
PLANADVISER - November/December 2017 - 47
PLANADVISER - November/December 2017 - 48
PLANADVISER - November/December 2017 - 49
PLANADVISER - November/December 2017 - 50
PLANADVISER - November/December 2017 - 51
PLANADVISER - November/December 2017 - 52
PLANADVISER - November/December 2017 - 53
PLANADVISER - November/December 2017 - Aggressive Plan Design
PLANADVISER - November/December 2017 - 55
PLANADVISER - November/December 2017 - 56
PLANADVISER - November/December 2017 - Professional Groups
PLANADVISER - November/December 2017 - 58
PLANADVISER - November/December 2017 - 59
PLANADVISER - November/December 2017 - The Value of Fixed Income
PLANADVISER - November/December 2017 - 61
PLANADVISER - November/December 2017 - 62
PLANADVISER - November/December 2017 - 63
PLANADVISER - November/December 2017 - 64
PLANADVISER - November/December 2017 - C3
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