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are the primary advisers to DB plans. These actuaries deal with
plan administration and data, investments, liabilities and funding
levels. Organizations with DB plans usually have one or more DC
plans, and, in most cases, the DB plan actuary also serves as a
primary DC plan adviser.
Pieper identifies two aspects of adviser proactivity with DB
plans. The first is " bringing fresh ideas and strategy, and staying
at the forefront and delivering intellectual capital, " he says. " And
then there's proactivity with their specific services such as monitoring
market changes and funded status and being proactive in
communicating what that means for their specific plan. "
The first aspect is easier to assess than the second, he says.
" I think it's difficult to evaluate whether or not they're going to
monitor, for example, interest rate changes and if [those] exceed
a certain change or threshold then they're going to communicate
what that means to you. That's very hard to evaluate, unless it's
specifically cited in the scope of services that they'll do that. "
He agrees that in-depth RFP questions and case
study responses can be helpful, but he has reservations
about relying too heavily on them to gauge
proactivity. The pool of advisers for large DB plans
is limited to a small number of global firms, he
points out. Sponsors can assume those firms
" have wide-ranging expertise and are generating
intellectual capital and fresh ideas. " It is also
likely those firms can cite multiple cases where
their work benefited a DB-plan client. In those
cases, he says, meeting the team that will service the
plan and communicate with the sponsor is essential.
The in-person evaluation meeting for a DB plan consultant
should cover a range of topics to assess proactivity, Pieper says.
How frequently does the consultant plan to communicate with
the sponsor? Will there be quarterly blue sky meetings or strategy
sessions to discuss fresh ideas the consultant brings?
For the plan committee, evaluating the consultants' communication
skills and the potential for rapport is also essential. " Do
[the consultants] have experience on similar plans with similar
clients in your industry? Do they have sufficient reach within their
organization to bring forward relevant experts on certain topics? "
Pieper says. Small-plan sponsors, he says, " need to do extra. You're
probably dealing with smaller firms, and so you'd need to evaluate
whether or not they have the right expertise. And how many
clients does this firm have in your business sector of your size or
of your plan design-those kinds of things. "
For DC plans, similarly, Scheinberg says, meetings should
go beyond meet-and-greet sessions; sponsors should push
advisers for concrete examples of proactivity over a range of
adviser duties. The meeting, moreover, is an opportunity to
gauge the experience and skill set of the adviser's staff, he says.
Some advisers have a centralized model in which the relationship
team focuses more on service while the in-depth technical
expertise resides primarily with headquarters staff. Other relationship
teams will have individuals with specialized skill sets.
Key Evaluation Areas
Sources cited plan governance, sponsor and participant education,
and plan design as essential areas where sponsors should investigate
advisers' proactivity. Dyson notes that plan committee education
and good governance procedures are usually closely related
and integrated. For many smaller plans, with roughly $5 million
to $50 million in plan assets, a proactive adviser can be well positioned
to help put a better governance structure in place, he says.
For instance, the adviser could recommend having separate investment,
education and administrative committees. " Maybe three
separate committees is a little bit of overkill for plans of this size,
but the concept and an adviser who says we can help you through
that process will make a difference, " Dyson says.
Bray concurs that ongoing sponsor education is important.
She cites topics such as plan litigation updates and SECURE
[Setting Every Community Up for Retirement Enhancement]
2.0 Act analyses as those about which sponsors need and want
updates from their adviser. Devoting 15 minutes at quarterly
meetings to highlighting developments that
can affect the sponsor's plan is one way to be
proactive, she says. Sponsors also like to learn
what other companies in their industry, and
their competitors for talent, and are doing with
their plans, Bray says.
Although the tax code changes frequently,
plan design sees meaningful changes about only
twice a decade, unless a significant piece of legislation
such as the two SECURE acts comes along,
Scheinberg says.
Nonetheless, proactive advisers regularly monitor a sponsor
client's demographics and finances to ensure the plan stays
aligned with the company's goals, he says. For instance, the
employer might have had a considerable workforce reduction or be
experiencing a shift to older and longer-tenured employees. The
sponsor's objectives for employment attraction and retention may
change over time because of its competitive landscape. " If [the
adviser's] not being proactive by looking at the demographic, the
budget of the organization, and its objectives, then ultimately you
might end up with something stale, " Scheinberg says.
Participant education is another area where proactive advisers
services. Scheinberg notes that
can distinguish their
some
advisers, especially at large firms, provide internally developed
participant education services. Other advisory firms and advisers
can be proactive by ensuring participants have access to highquality
education from third parties or the plan's recordkeeper.
" When you're talking about even midsize plans, $10 million,
$20 million and up, the recordkeeping industry has a plethora of
topics and data to identify areas for communication and education
that would theoretically benefit the plan as a whole and the individual
participants, " Scheinberg says. " Proactive advisers can help
advocate for the sponsor in those services' delivery in a way that
maximizes the recordkeeper relationship and the suite of education
and communication tools it has. " -Ed McCarthy
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