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TOTAL BENEFITS | TOTAL RETIREMENT OFFERING
noting it is common for a sponsor to add
DB services to its DC relationship. " Some
clients are simply looking for a pension
internet portal, " he says. " Others that want
to get out of the pension business altogether
want us to handle day-to-day administration
of their DB plan. In many cases,
they're looking to freeze, and then totally
exit, their DB plan, so we set a one-to-twoyear
time frame for them to gradually transition
away from the pension plan. "
Milliman's TRO services are centered
on administration and actuarial services,
says Kyle Hughes, a principal and
employee benefits national sales leader for
the company, in Dallas. Even just offering
these two central services, Milliman is able
to " provide a customized, flexible solution
tailored to each client, " Hughes says.
Knowing what type of plans will be
part of the relationship and ensuring the
provider can support those is key. While
many TRO relationships are a combination
of DB and DC services, other firms
distinguish their offerings by including
equity compensation plans. For example,
Principal has long included employee
stock ownership plans (ESOPs) and executive
benefits in its TRO offerings, Patterson
says. " In the past year, we expanded that
to include, long-term incentive plans and
restricted stock option plans. "
TRO benefits both the sponsor and
participants, says Hughes. Sponsors can
simplify their retirement plan administration
role, and participants, by seeing
their DB and DC benefits through a single
portal, can gain a better understanding of
and appreciation for their value, he says.
Some providers offer a broader
TRO solution that might even bleed into
retirement income. Says David Swallow,
managing director, consulting relations
at TIAA in Tampa, Florida, " The unique
aspects of TIAA's TRO offering is that
we can leverage the retirement income
aspect in the DC plan by taking into
account what's available in the DB plan
and provide DB-like investment options
to the DC participants. "
TRO also gives sponsors access to
advanced benefits-management technology
without having to make the capital
investment themselves, Patterson says,
adding that this often replaces manual
processes used to project benefits calculations.
Further, the arrangement results
in a single transmission of census data
for both DC and DB plans as well as
combined nondiscrimination testing and
Form 5500 filing, he says.
" Obviously, " says Hughes, " dealing
with only one vendor streamlines a sponsor's
vendor oversight responsibilities. "
What typically triggers a sponsor's
interest in turning to a TRO provider is
the looming retirement of the human
resources (HR) or finance executive in
charge of retirement-plan or pension-plan
administration-and the impending loss
of key institutional knowledge, Hughes
says. Other sponsors simply become aware
of the tremendous cost savings that TRO
can offer, he says.
Still others are interested in automating
their benefits, says Swallow.
" More retirement benefits departments
today are looking at how to make their
processes more efficient, and, in many
cases, that prompts them to bring in
outside experts such as us. " -Lee Barney
Will TRO Expand to Emergency Savings?
SINCE the pandemic has exposed many Americans' lack of
emergency savings, retirement plan recordkeepers have been
scrambling to create solutions, according to a recent report from
Commonwealth. Recordkeeping providers, including providers
with total retirement offering (TRO) services, are now looking to
include emergency savings as one of those.
The Commonwealth report, " Eye on Systemic Change in the
Retirement Industry: How Recordkeepers Are Leading the Charge
to Address the Emergency Savings Crisis, " is based on interviews
with nine of the nation's largest recordkeepers. Researchers found
that most of the nine are developing solutions not tied to retirement
accounts, though several said they would offer both in-plan
and out-of-plan options to meet participant and sponsor demand.
As with many aspects of financial wellness, there is debate on
what constitutes an ideal emergency savings account. For instance,
one recordkeeper said a participant would be covered with just
$1,000 in savings, while others said an emergency account should
be able to pay for three to six months' worth of expenses.
As sponsors consider whether and how to integrate a solution
into their benefits offerings, they should determine what a
target saving-success metric would be for their participants. They
also need to decide how the funds should be invested, if at all, and
how liquid they should be, Commonwealth wrote. Other considerations
might include whether to offer incentives such as a match.
Then there is the decision of whether to make the solution
in-plan or out-of-plan. In-plan may be simpler to implement,
because the payroll integration is already there via the defined
contribution (DC) plan, Commonwealth wrote. Also, if workers
first open an emergency savings account, this can provide a ramp
for them to the retirement plan. One drawback is that withdrawals
are subject to taxes and penalties for those under age 59.5 if the
withdrawal is structured as an after-tax 401(k) contribution.
" The benefits of out-of-plan options include the ability to
launch faster, to incorporate engaging features and to allow for
portability between employers, " the report says. Because they are
separate from the 401(k), they can incur additional fees. -LB
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