PLANSPONSOR - November - December 2023 - 35

While some plan sponsors might be
inclined to put off making changes until
whatever controversy subsides, that may
not always be practical. New data on what
employees are looking for in retirement
plan investment options suggests that
younger and older employees alike want
be weighed against the overall goals and
needs of a retirement plan. " The longterm
trend we've seen from plan sponsors
is a desire to streamline investment
menus, so the core offering is diverse but
is not overwhelming participants with
options, " she says.
" The long-term trend we've seen
from plan sponsors is a desire to
streamline investment menus, so
the core offering is diverse but is
not overwhelming participants
with options. "
more options within their retirement
plan offerings.
Traci Stahl, chief operating officer at
Schwab Workplace Financial Services in
Cleveland, says she is having more conversations
with sponsors about how core
investment menus should respond to these
demands. Whether it is ESG funds, digital
assets or retirement income, each has both
in-plan and out-of-plan solutions; that gives
sponsors leeway in how they offer exposure
to these asset classes.
Stahl encourages plan sponsors to
spend time learning what their participant
population looks like in detail. If demand
for specific investment offerings or solutions
is coming from a small group of
participants, it might make more sense to
include a self-directed brokerage window
for that group, she says. A self-directed
option can also give sponsors the ability
to support highly engaged participants
while evaluating whether a change must
be made at plan level.
Large Plans Lead the Way
Marla Kreindler, a partner in law firm
Morgan Lewis in Chicago, who focuses
on fiduciary guidance, says investor
interest in certain asset classes should
Because of this trend toward simplification,
Kreindler notes, it may take considerable
time before there are widespread
changes to core investment menus in
retirement plans.
Matthew Eickman, national retirement
practice leader at Qualified Plan
Advisors in Omaha, Nebraska, agrees.
He says the plan sponsors he works with
are largely still in the examination phase
when, for example, it comes to adding ESG
or retirement income solutions.
Where he observes movement is in
larger plans and " industries that are already
ESG aligned or ESG friendly. Companies
in those industries typically want to have
their plans reflect that alignment, " he says.
" Companies that want to attract a younger
workforce are also often the ones making
changes to their plans to add ESG. " He
adds that companies seeking a younger
demographic are also more likely to add
investment options for digital assets.
For midsize and smaller plans or
plans not yet ready to make a change, Stan
Milovancev, executive vice president at
CBIZ Retirement Plan Services in Akron,
Ohio, says a close evaluation of existing
menu choices might reveal that the plan
already provides exposure to ESG or other
popular investment themes.
" If you look at sustainability, for
instance, there are a number of funds
that are highly rated for sustainability that
don't necessarily have that in their fund
name, " he says. " In that case, it might
be worth highlighting that rating rather
than making a significant change to the
existing menu. "
Suitability and Engagement
Apart from the desires of participants, plan
sponsors also must consider the suitability
of any change. ESG funds, for example,
have been the subject of a number of court
challenges and legislative efforts in recent
months. As a result, asset flows into these
funds have been more volatile. Investors
pulled $2.7 billion from ESG funds in the
third quarter, says data from Morningstar.
A recent court ruling suggests
that ESG investments are still acceptable
from a fiduciary perspective, but
if funds are shrinking and closing,
that
could negatively
affect
suitability.
According to Morningstar, big name asset
managers including BlackRock, Columbia
Threadneedle and Hartford all closed ESG
funds in the third quarter.
James Buccella, president of fiduciary
investment manager ADP Strategic Plan
Services in Albany, New York, says, when
asset classes become the subject of heated
rhetoric, it can lead to abrupt changes
within investment funds themselves.
" Anytime a plan sponsor is considering
something new, it has to look at
suitability, " he says. " If you start offering
something and then the rules change
significantly or the number of investment
options dwindle, then you run into
an issue of needing to find an acceptable
replacement, which can be challenging. "
Kreindler concurs with Stahl's lessercould-be-more
approach. " Whether it's
ESG or retirement income, if the desire
is coming from a smaller group of more
engaged participants, giving them the
option to self-direct or get advice through
a brokerage window might make more
sense. " -Bailey McCann
PLANSPONSOR.COM November - December 2023 35
http://www.PLANSPONSOR.COM
PLANSPONSOR - November - December 2023

Table of Contents for the Digital Edition of PLANSPONSOR - November - December 2023
