PLANADVISER - September/October 2022 - 24

beyond 401(k) / participant services
XYZ type of plan. Everyone is still trying to figure It out. "
Voris compares the conversations to those that occurred
in the industry during the early days of target-date funds,
before they became widely adopted. Just as consultants,
advisers and recordkeepers spent years doing research and
due diligence to feel comfortable recommending the funds,
they need to do the same with products for retirees such
as annuities, fixed-income funds and target-date payout
funds. Historically, plan advisers have not had staff dedicated
to such work.
Aside from demographics
and expenses, the decision
of whether to support retirees
often simply comes down to
the plan's philosophy.
Concerns Remain
A 2022 report from Alight found that two-thirds of plan
sponsors had operational or administrative concerns
related to offering in-plan annuities, and nearly 60% had
fiduciary concerns. More than half of plan sponsors in
that survey said they were waiting for the in-plan annuity
market to evolve.
Still, Voris expects the momentum to pick up, especially
if the proposed SECURE Act 2.0 legislation-which
serves as an addition to the Setting Every Community Up
for Retirement Enhancement Act of 2019-includes provisions
making it easier for plan sponsors to offer lifetime
income products within their plans. He says companies are
also looking at other solutions, including financial planning,
Social Security, and health-care optimization tools, as well
as a distribution strategy to build a retirement paycheck.
" There's a recognition that we now have a demographic
that's been in a 401(k) plan for some or all of their career and
have [saved] significant assets over that time, " Voris says.
Some plan sponsors might also see providing a " cradleto-grave "
solution as a competitive advantage in a tight
labor market. " As we have seen an unprecedented level
of turnover during the pandemic, employers are looking
for ways to provide unique and differentiated benefits-
communicating to employees that their long-term financial
security matters can be compelling, " says Kathleen
Kelly, managing partner in Compass Financial Partners, a
Marsh & McLennan Agency LLC, in Greensboro, North Carolina.
" Providing a plan design that can support retirement
spending is attractive. "
In addition to retirement income products, plan sponsors
are also asking advisers about advice and financial
wellness offerings targeted to retirees, says Steven Johnian,
a manager with the strategic retirement solutions group at
the Commonwealth Fund in Boston.
Demographics Count
The retirement solutions that plan sponsors select may
vary significantly, depending on the demographics of the
employer's workforce. The lowest paid, for example, are apt
to replace a larger portion of their income with Social Security,
while the highest paid might not need to replace all of
their income for retirement.
" So we need to help the plan sponsor think about who
it wants to help, " Schwartz says. " Overall, it's very hard,
and expensive, to be all things to all people. Many working
Americans who are at risk relative to retirement would
benefit from basic financial planning. And they don't have
money or investable net worth to purchase it themselves. "
Meanwhile, most high-income workers are less at risk and
also have access to resources outside of the plan, he adds.
That said, long-term employees may have another incentive
to keep their assets in-plan.
" Participants who have worked for a company their entire
career, or close to it, have a comfort level and familiarity
with their retirement plan, making it much more appealing
to stay, " Kelly says. " Generally speaking, change is hard.
We know that participants are most affected by their sense
of inertia, so it's crucial for the employer, as plan sponsor,
to put solutions into place that help put them on the most
likely path for retirement success. "
Aside from demographics and expenses, the decision of
whether to support retirees often simply comes down to the
plan's philosophy. " Some employers' goal for their plan is to
help people accumulate money before they leave, but other
employers believe the goal is to help people have a financially
stable retirement with consistent income for life, "
Schwartz says. " In that case, not supporting retirees is a
disconnect from the mission statement. I don't think there's
a right or a wrong answer. "
Different Levels of Support
At a minimum, plan sponsors should be offering retirees
information about their options with regard to their plan
balance when they retire, including the option to either
roll it out of the plan or keep it in and take advantage of
benefits such as in-plan annuities or managed accounts, if
those are available, Johnian says.
Plan sponsors that want to do more can leverage their
adviser to connect with retired participants regularly to
help them understand, and make ongoing decisions about,
their account, Johnian says.
Advisers, in turn, can play an important role in helping
the plan sponsor determine what its retirees need. To do
that, they will need an understanding of the products available
in the market now and which one might be the best fit
for the particular plan, Voris says.
" Most advisers will approach the conversation with
data, " says Johnian. " They're going to look at 'How many
retirees are there?' and 'When's the last time we spoke to
them about what their needs are?' If [the sponsor] wants
them to stay in the plan, it's about providing terminated
participant services, and there isn't much substitute for
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PLANADVISER - September/October 2022

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