PLANSPONSOR - April/May 2020 - 21

time to 'stretch' the match and have participants contribute more
to get the full match. That's not something we would encourage
at an employer such as a manufacturing facility where workers
are living paycheck to paycheck. But where participants have the
ability to save more, encourage them to do more. "
3
Re-evaluate Your Target-Date Funds' Risks. Because so
much plan money goes into target-date funds (TDFs), once
the market volatility subsides, Gredys expects sponsors to work
with their adviser to look closer at how well these funds have
worked. " After the 2008 market volatility, many of the targetdate
fund managers said, 'We're going to restructure our portfolios' "
to better withstand volatility, he says. " So sponsors will be
asking, 'How did our target-date funds perform this time in the
market drop, particularly the 2020 fund?' "
There has been a 10-year bull run in the market, Cunha
says, so the majority of target-date funds did well and prompted
no sponsor worries. " It's not until the rubber hits the road in a
down-market that folks get more concerned, " he says. " I think
there's going to be a much closer look by sponsors at matching
the risk profile of their QDIA [qualified default investment alternative]
with their employee population. "
As part of its annual evaluation of a plan's target-date funds,
RMB Capital considers whether the TDF family still suits a plan's
participants, Rosselle says. " If you have really aggressive targetdate
funds as your default, and all of your employees are on track,
maybe you're subjecting them to too much risk, " he says. " The
challenge is that when they get used to strong performance, sometimes
committees don't want to go to another fund family, even if
the fund family they have increases the risk for participants. "
Now is the time that plan sponsors will see the wisdom of
choosing a default investment with a better risk-adjusted return,
because these funds likely have not declined as much in the
downturn, Schultheiss says. " Some clients do ask, 'Would we be
giving up a lot of return to do that?' I tell them, 'We look for
funds that are in the top 30% of performance and the top 30% of
risk-adjusted returns, but we'll give up a little performance to get
a better risk-adjusted return.' "
Palladino anticipates that 401(k) & 403(b) Fiduciary Advisors'
sponsor clients will still want to utilize target-date funds as their
QDIA, but some will want to look into changing managers. Many
of his clients already have shifted to custom target-date funds that
include a risk-based element: Each target-date fund vintage has
a conservative, a moderate and an aggressive glide path option.
More may offer this now, so that their participants can better
control their investments' risk level, he observes.
4
Consider Stepping Up Your Financial Wellness Program.
With so many Americans now struggling with their
personal finances, there will be a big need for employers to work
with their adviser and recordkeeper on beefing up financial wellness
offerings, Schultheiss says. " Now, more than ever, is when
people need that stuff, " he says. " Before, everybody wanted to talk
about it, but I didn't see nearly as many employers implementing
it. I think that's going to change now. This time has shed a light
on the answer to the question, 'Would my employees value it?'
It's in times such as this that you're able to really show the value
of a financial wellness program. We can educate people on, 'How
do you survive the next pullback?' "
To get back on track, employers and employees need to
put a bigger focus on holistic financial wellness, Schultheiss
says. Many recordkeepers have very useful financial wellness
education and tools on their participant sites, he says. " But [the
employee] usage rate of some of these platforms is extremely
low, under 10%, " he says. " I'd love to see people utilize these
tools more to encourage financial literacy. In normal times,
people just don't have that sense of urgency. " Many more people
likely have a sense of urgency about their personal finances
now, he says.
Once the crisis subsides, Murphy anticipates more employee
interest in engaging on financial wellness topics. " The economy
will start to bounce back, but I don't think people will immediately
'spend into' the economy. An event such as this does cause
some self-reflection, " he says. " When you go through a market
disruption and an economic disruption, it causes people to step
back and say, 'Do I have the right spending habits? And am I
doing everything I can to save?' "
5
Think About How Much Your Recordkeeper and Adviser
Helped. Everyone interviewed for this story agreed that
once the situation improves, plan sponsors will take stock of how
much help they got from their recordkeeper and plan adviser.
Some sponsors may make a move if they feel like they got too
little support. " I think sponsors are going to say, 'We went
through a very challenging period. Who were the partners who
supported us and our employees, and took a proactive approach
to doing it?' " Murphy says. " As always, there will be winners, and
there will be losers. "
Sponsors will look at how much their adviser and recordkeeper
did to help them and their participants " weather the
storm, " Palladino says. " Sponsors are going to be asking, 'Who
stepped up to the plate to help me and my participants? Did
the recordkeeper waive distribution fees for my terminated
employees and have good participant educational material about
the market-decline and volatility? And was my adviser open to
my employees calling him or her if they had a question, or was
the adviser too busy dealing with wealth management clients to
give us the time of day?' "
Asked how he sees his work as a plan adviser during this
time, Gredys talks about helping overwhelmed employers get
from point A to point B on their plan decisions and plan work.
" They want somebody they can rely on and ask, 'What do we
need to do now? And what do we need to do in a few months?' "
he says. " Sponsors need to know they have someplace to go if
they have a question, and they can get a quick response. Because
the employer has been busy surviving, it wants to have somebody
who is looking out for it. " -Judy Ward
PLANSPONSOR.COM April - May 2020 21
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