PLANSPONSOR - May - June 2023 - 16

COVER STORY
Start With an A udit
Plan sponsors are likely already in a rhythm when it comes to
benchmarking their plans. As PLANSPONSOR has reported,
best practices suggest that sponsors evaluate the total cost of
their plan and the offerings of comparable plans at least every
three years to ensure they are meeting their fiduciary responsibilities
for reasonableness and value of service.
According to sources, new programs such as financial wellness
or in-plan advice may not be fully reflected in a standard
benchmark because the costs for those programs are normally
covered by the plan sponsor, not the participants.
To make the best use of these programs, Preston Traverse, a
partner in the defined contribution and financial wellness business
at retirement consultant Mercer in Boston , suggests that
plan sponsors ascertain what is available to them in-plan and via
providers , along with the demographics of participants. " It ' s much
easier to add on to a plan when you know exactly what it currently
offers, as well as what your participant group looks like, " he says.
" Demographics are a key part of these programs, and not just age
ranges. If you are a law firm, for example, there might be unique
needs based on how compensation structures are set up. "
Getting this baseline of information is n o t only useful for
adding on new benefits, says David Kennedy, a senior analyst
in the retirement practice at Cerulli Associates in Boston. It
can also provide plan sponsors with good data that can be used
to think through the plan's future needs, especially if big age
disparities exist-e.g.,
if a plan has a large number of both
near-retirees and young participants but few people in midcareer.
That might change the type of financial education that
the plan sponsor thinks it will need, Kennedy says. This could
demand looking more closely at financial wellness programs
with a student debt relief component or other benefits more
relevant to early career participants. Similarly, financial advice
or retirement income solutions could emerge as a more urgent
priority than previously expected, he says.
From there, plan sponsors should evaluate what type of
Plan Sponsors Take a Closer Look at Adding
Financial Advice to Retirement Plan Benefits
E
xpert sources for this story and plan sponsors both report that plan participants
want financial advice options in-plan. Plans with target - date funds already offer
some measure of financial advice as a component of the fund product. However, the
extent of this advice is limited and often is not very customizable or specific.
For plan sponsors looking to add advice, this can take on many forms. Some sponsors
work with 3(38) advis e rs, who handle fiduciary investment responsibility for the
plan and through that relationship may also offer investment advice.
Retirement consultants say many small to midsize plans are considering adding a
financial advis e r to their financial wellness program; the advis e r might provide more
individualized advice to participants on an opt-in basis. Preston Traverse, with Mercer,
says this type of relationship could help plan sponsors that want to offer advice in-plan.
But, he notes, advisers could benefit as well. " The result might be that the adviser is
able to take on more wealth management clients if someone is looking for traditional
financial planning. "
For plan sponsors, when it comes to engaging with advis e rs, either to manage the
plan or as an optional support service available to participants, due diligence is crucial.
The Department of Labor has a five - part test for fiduciary financial advice that plans
covered by the Employee Retirement Income Security Act need to meet. For optional
offerings available to plan participants, those programs are still evolving and are often
highly customized to the unique needs of a given plan.
As long as it is clear that the plan sponsor is not endorsing any specific products
and that participants are able to discuss their concerns with advis e rs on an independent
basis, participants are more likely to engage with the service, Traverse says. " We're still
in the early stages with these offerings, so we don't have a lot of data on uptake, and
getting engagement from participants is always difficult. But we're seeing more plan
sponsors trying to meet participants where they are and provide solutions. That's an
important step toward improving engagement. " -BM
16 PLANSPONSOR.COM May - June 2023
programs they want to add, what the
market offers and what their existing
providers offer directly or via partnerships
.
Kennedy points to the wide
variety of financial wellness and financial
education programs, noting that
plan sponsors should take the differences
into account during their evaluation.
" Some programs really excel at
student loan relief, for example, " he
says. " Other programs can do more
on big financial milestones or helping
you set up budgets or legal documents.
Plan sponsors need to know what they
want their program to be able to do. "
Provider P latforms Expand
M any recordkeepers have made
significant investments to expand
their retirement benefit portals, so
it may be that a solution is already
available within an existing provider
relationship , says David Fairburn, an
associate partner in the retirement
solutions practice at global consultancy
Aon in New York City. The
biggest recordkeepers are likely to
offer financial wellness, advice and
some services for retirement income
within their existing platform offerings;
this is a significant upgrade
from just a few years ago.

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