PLANADVISER - Winter 2023 - 18

Cover Story
plans. Between the tax credits for small-plan sponsors and
states such as California pushing their state payroll-deduction
individual retirement account programs-or, as I like to
call them, DMV [Department of Motor Vehicles] IRAs-the
issue for advisers isn't explaining why employers need a plan
but explaining how Uncle Sam will pay them to adopt a " real "
plan that better serves their needs. And with the automaticenrollment/automatic-escalation
provisions, small plans
will grow faster than ever.
Longer term, a lot depends on whether the Department
of Labor succeeds in finishing its ill-advised " Fiduciary 3.0 "
regulation. It's a shame the resources devoted to tilting at
this regulatory windmill are not instead going to implement
the SECURE 2.0 provisions, which would actually help
participants better save for retirement.
Nick Maynard, senior vice president,
Commonwealth, Boston: Next year will
be a critical time for the adoption of
workplace emergency savings programs,
as key policy changes and solutions
remove barriers for plan sponsors and
recordkeepers. We see a high level of interest from both
plan sponsors and recordkeepers in leveraging the provisions
of SECURE 2.0 to build solutions that enable the financial
well-being of a diverse workforce.
In 2024, there's a real opportunity for retirement plan
advisers to align employers' goals with worker financial
well-being and recordkeepers' goals with participation
rates, maximizing matches and reducing plan leakage by
engaging plan sponsors in key areas of financial wellness
such as emergency savings and student debt.
Move Toward 3(38) Advisers
As the Decisionmakers
Kimberlene
Matthews,
David Swallow, head of consultant relations,
TIAA, Tampa, Florida: Of our over
300 client relationships, many have an
adviser working both as a 3(21) and a
3(38). But we have not seen what I'd say
is a significant interest in moving toward
a full 3(38) model with some of our larger
clients upmarket. We typically will see the 3(38) service
offered to the smaller and midmarket clients. At least,
that's been our experience to date, and I would anticipate
that continuing.
Retirement Income
Michelle Richter-Gordon,
co-founder,
Annuity Research & Consulting, New
York City:
In the realm of
in-plan
retirement income, with an increasing
number of plan sponsors, we are moving
out of the beginning phases of consideration and into the
start of implementation. Among the larger plans that are
building a retirement tier in an effort to retain participants
through retirement, I'm seeing many plans consider and/or
implement more than one product or service.
For example, I've seen a number of plans choose a targetdate
fund that includes annuity benefits for participants
who are in the accumulation stage, while also adding a
single-premium immediate annuity marketplace window
for participants at retirement.
ARC expects that next year will bring more questions
about evaluation of insurer creditworthiness to the forefront
of fiduciaries' minds. We expect that DOL re-guidance
mandated by SECURE 2.0 in Interpretive Bulletin 95-1,
which will occur by this December 29, will be putative
toward a number of carriers that are currently leaders in
the DC space.
managing
director, pension and enterprise solutions,
PNC Institutional Asset Management,
Chicago: For the past couple of
decades, we've seen a shift toward 3(38)
advisers for pension plans. Strategy, resources and costs have
been the main drivers. Looking into 2024, strategy, resources
and costs will remain a focus as plan sponsors evaluate the
effectiveness of their 3(38) advisers.
On the strategy side, with recent improvements in
funded ratios caused by higher interest rates, organizations
are evaluating whether their provider's strategy is aligned
with their objectives. Execution is key with organizations
seeking full customization versus off-the-shelf investment
vehicles, along with a 3(38) adviser's ability to be nimble
with glide path execution. Even as plans reach the end of
their glide path and look to terminate, plan sponsors may
seek a 3(38) adviser who can build a portfolio that insurers
would take in kind. Finally, on the cost front, as some adviser
pricing models are outdated, plan sponsors are shopping
around to ensure that their all-in costs for managing the
pension are aligned with current market prices.
Swallow: The uptake in retirement income within defined
contribution plans is continuing to grow. It's really spiking
as far as it relates to adviser activity, adviser interest and
adviser utilization. We anticipate this trend continuing
into next year because advisers are using retirement
income to differentiate their services and bring what I'd
say is a thought-leading industry concept to their clients,
which I think, participants need.
We've also seen firms dedicating a specific resource
to evaluating retirement income products. It's become a
specialized role: basically, a subject matter expert. We
anticipate continuing to see this as a trend. There've been
a handful of firms that have had this resource in place for
a couple of years, but now we see firms that historically
have not had a dedicated resource now putting one in place
or identifying someone on their own team to serve as an
expert in retirement income products. We're very excited
about that, because it's an opportunity to see where the
market will be focusing, that these additional firms want
to learn, and they also want to be able to evaluate the
different products. -Ed McCarthy
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PLANADVISER - Winter 2023

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