You already know how valuable your retirement plan is as a business tool, but if you aren’t taking advantage of today’s retirement plan trends you could be missing out on key opportunities that could drive even greater results. It’s not uncommon for plan sponsors to become accustomed to a few fundamental principles when it comes to managing their plans. And while this isn’t necessarily a make-or-break strategy, we find that plan sponsors who take this approach are only scratching the surface of what their plans can achieve for the business and their plan participants.
If you haven’t assessed your retirement plan design and management strategy lately, ask yourself the following questions to find out if you could be doing more to prepare your employees for retirement. Then reach out to your plan administrator for tips to help you make up for lost time.
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Are you collecting the right data?
“Data” continues to be a buzzword on everybody’s lips – including ours – and for good reason! Every day, the industry becomes more sophisticated in its ability to collect, track and report data; and the data being collected is changing the face of the retirement planning industry. When you collect the right data from you participants, you gain the tools needed to determine:
- Whether a participant is on track for retirement.
- What actions you can take to assist the participants who are not on track.
- The best ways to encourage, validate and/or advise those who are moving in the right direction.
Do you utilize automatic features?
Time and time again, we continue to see that the plans with the highest adoption rates demonstrate the highest participation and deferrals. And, not coincidently, the plans that utilize automatic features continue to drive higher instances of adoption. So yes, while implementing automatic features isn’t a new concept, when it comes to getting your participants “retirement ready,” the merits of utilizing features such as automatic enrollment bears repeating.
Is their savings strategy in line with their target retirement dates?
Target date funds make a great addition to retirement plans that already utilize automatic features because they help take the guess work out of the determining how much a participant needs to defer to maintain their existing retirement track. While this is not a perfect solution, plans that do utilize target date funds tap into a variety of existing data points to arrive at efficient investment structures, while favoring a highly prudent investment position.
Do you know what options are available to those without access to formal retirement plans?
When it comes to establishing a sustainable plan for retirement, employees continue look to their employers for assistance – even when the employer doesn’t offer a formal retirement plan. One way employers can set themselves apart is to point to retirement savings programs that promote savings strategies regardless of an employee’s ability to access a formalized retirement plan. For example, while the U.S. government is still fine-tuning its automatic IRA program in terms of refinement and usage, it’s worthwhile to note the significance of this initiative when it comes to promoting the future sustainability of employees.
Have you embraced the 401(k) fee disclosure mandate?
Society continues to advocate transparency in all matters, particularly those that concern financial stability, which is why the fee disclosure mandate has been a welcome addition to all 401(k) plans. When sponsors communicate with participants in a way that is transparent, participants demonstrate an increased willingness to embrace the advice being given to them. As a result, this trend has resulted in greater plan success.
Email Rea & Associates to learn more about these retirement plan design trends and what you can do to move the needle.
By Andrea McLane, QKA (Dublin office)