RETIREMENT PLAN
Is Your Group Retirement Plan Set Up For Success?
Over the years, we have seen many changes in the pension and group retirement industry, the biggest of them being the massive shift from defined benefit pension plans to defined contribution plans. This transition has led to employees being the ones responsible for making investment choices that will determine the growth of their investments and ultimately their income in retirement. This newfound responsibility most often leads to retirement plan members being so intimidated by the daunting task of setting up their investments that they either make no choice at all or choose to not even participate in the plan.
ADVISOR AND SPONSOR RESPONSIBILITIES So what responsibilities fall on the plan sponsor and the plan advisor to remedy or manage these issues? The role of the retirement plan advisor focuses on plan design and operations, fiduciary responsibilities, plan compliance, and, most importantly, investment advice and direction to help the organization’ s employees properly prepare for retirement. Sponsors go to the trouble and cost of setting up these plans for employees, so it is important that they take the time to work with their advisors to ensure their employees are getting the advice, resources, and sometimes“ forced” direction that they need.
BY: PATRICK HOOEY, CONSULTANT, JDIMI CONSULTING
about their individual finances, their health and productivity are negatively impacted, which typically leads to performance issues in the workplace.
Providing access to an experienced and reputable financial professional through a workplace retirement plan has been shown to increase employee retirement confidence and preparedness. Research shows that employees who receive investment management advice in the workplace have higher account balances and better investment performance than those who do not. Having that professional guidance will add to your existing benefits package, and it will result in improved employee engagement and enhance your employees’ ability to retire on their terms. +
Patrick began his career 4 years ago in the group retirement sector as an advisor. Over the years he has gained experience in all aspects of employee benefits and now works as a consultant on both group benefit and group retirement plans.
EMPLOYEE ENGAGEMENT The importance of employee engagement cannot be overstated when considering the role of your retirement plan advisor. Employees can depend on the advisor for communicating the plan in understandable terms while making them aware of how the plan will benefit them and their families. Often it is a lack of understanding that leads to employees not participating in a company-sponsored plan or not making any investment selection. This is why the advisor and plan sponsor have to make strategic plan design decisions.
When plan members don’ t make an investment choice, they end up in what is called a default fund, which is often set up as something with little to no risk and also little to no returns such as a high-interest money market fund. By implementing a more strategic default fund such as a retirement or target date fund, you can provide that“ forced” direction and guidance that many plan members require.
The same can be said about plan members trying to do too much. It is important to develop a platform that offers an array of diversified investment options while also not overwhelming the plan member or providing them with options that are too risky for a pension or group retirement plan portfolio.
Without question, the uncertainty surrounding future retirement goals while managing expenses and debt can understandably contribute to employee financial stress. As employees worry more
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