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not what plan sponsors are thinking. " We see plan sponsors more
focused on evaluating liquid nonguaranteed options as a first step
in their retirement income journey, " she says. " We do believe that
guaranteed solutions or annuit[ies] will have a place in the broader
ecosystem of in-plan retirement income solutions, but that's just
not where the majority of plan sponsors are today as they explore
in-plan solutions, " Sclafani maintains. She says over 50 plans offer
T. Rowe Price's managed payout capability, which is a nonguaranteed
in-plan retirement income solution, and much of the fund's
adoption has occurred in the past 12 months.
Roberta Rafaloff, vice president of institutional income
annuities with MetLife in New York City, says SECURE 2.0's
provisions made qualified longevity annuity contracts more
accessible for DC plan participants by increasing premium maximums.
The act " eliminates the 25% threshold and increases the
dollar limit to $200,000, which is indexed for inflation, " she
says. " The legislation also clarifies that survivor benefits may
be paid in the case of divorce. Previously, plan participants'
premium maximums were limited to the lesser of 25% of the
account balance or $125,000. "
The 2023 Callan DC Trends Survey also showed very little
use or desire to add annuity products-those held just 3% of
plan assets. " Generally, participants can always find annuities
outside the plan, " Ungerman points out. " However, there are
many initiatives by both recordkeepers and insurance providers
to offer greater access to group annuity structures to plan sponsors
for consideration. "
Financial Wellness
WHERE WE ARE: Rebecca Liebman, CEO and co-founder at
LearnLux in Boston, says turbulence defined the financial landscape
last year. " 2023 highlighted the interconnectivity between
individual financial decisions and economic factors, " Liebman
says. " Many plan sponsors noticed these trends and acted. In 2023,
we saw a large increase in companies seeking trusted financial
well-being benefits to support employees' financial resilience. "
The Employee Benefit Research Institute's 2023 EBRI
Financial Well-Being Employer Survey supports the idea that
more sponsors are adopting financial wellness programs. Fiftyfour
percent of the employers surveyed that were interested in
implementing well-being benefits currently offered a program, a
result essentially unchanged from 2018 through 2022. Yet, the
report noted that employers without financial wellness initiatives
increasingly say they are working to implement a program instead
of just being interested in providing one. The percentage doing so
increased from 12% in 2018 to 29% last year. Correspondingly, the
" just interested " percentage fell from 34% to 18%.
WHAT'S AHEAD: Liebman says he thinks 2024 will be a banner
year for workplace financial well-being. Multiple provisions of
SECURE 2.0 go into effect, presenting
opportunities and challenges for
employers. She says financial well-being
programs with unbiased guidance from certified
financial planners will be the gold standard.
The EBRI report concludes that financial well-being will
continue to evolve from " a focus on retirement preparedness
to a more complete picture across all aspects of an individual's
finances, despite there still being a retirement preparedness
bias. With the hope of reducing employees' financial stress and
increasing productivity, companies are looking for better ways
to evaluate the impact of their financial well-being programs,
whether on a retention/recruitment or productivity basis. "
Litigation
WHERE WE ARE: There has been an upward spike in litigation
since 2020, according to Bonnie Treichel, a partner in Endeavor
Law in Prairie Village, Kansas. Litigants filed 101 new cases in
2020, 60 new cases in 2021, 89 new cases in 2022, and the
numbers were still coming in, as of press time, for 2023. " These
cases no longer focus solely on the mega 401(k) market, but they
now include more plan types and smaller plans, " Treichel says.
" The cases are also filed by many more plaintiffs' firms and
include a more expansive set of claims. "
WHAT'S AHEAD: Treichel anticipates litigation this year will
focus on the core argument of excessive fees coupled with additional
claims related to, for instance, managed accounts or
proprietary funds, improper use of participant data, cybersecurity
and failure to protect participant data.
Treichel cites one suit that argued, " Many managed account
services merely mimic the asset allocations available through a
target-date fund while charging additional unnecessary fees for
their services. " That case resulted in a $3 million settlement.
" As managed account services become more popular, and there
have historically been limited ways to benchmark [them], they
may be a target for litigation where proper due diligence was not
conducted, " she says.
Using participant data for wellness services, and for
possible cross-selling of additional services by providers, creates
the potential for other claims against plan sponsors, including
single-participant claims related to cybersecurity. Treichel
mentions Disberry v. Colgate-Palmolive as a recent example.
For sponsors, Treichel says she expects the focus this year to
remain on: 1) maintaining and training plan committee members,
as turnover on committees has been high since COVID-19; 2)
implementing required provisions from the SECURE Act, such as
long-term part-time-employee requirements; and 3) incorporating
best practices based on lessons learned from ERISA litigation in
keeping with its rapid increase. -Ed McCarthy
PLANSPONSOR.COM January - February 2024 21
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