PLANSPONSOR - October/November 2018 - 37

eliminate the ability to take loans in plans, " says Kristi Baker,
managing partner at the Indianapolis advisory firm. " But that's
not the world we're in today. "
Understanding the loan data helps point the way to changes an
employer can make to reduce leakage. Most commonly, CSI's new
plan sponsor clients reduce the availability of loans outstanding
from two to one. " You can also add hardship provisions, so a plan
requires that loans be taken only as hardships, " Baker adds.
Alight Solutions sees an interesting pattern when it looks at
its clients' loan data, Austin says. " What we've found that is eyeopening
is if a plan allows participants to take three loans at a time,
the majority of people with loans have three loans outstanding. "
Atlanta Retirement Partners has taken on new plan clients
that offer as many as four loans concurrently; it immediately counsels
those sponsors to reduce permitted loans to one, Griffin says.
" If we have a start-up plan now, we don't even do loans, because
we educate employers that it would be detrimental to the plan, " he
says. " The industry has made it so easy for people to take a loan. "
Some of ARP's plan clients, in fact, no longer let participants
make a loan request online. They have to physically go to their
human resources (HR) department to make the request, removing
the anonymity that making it online had allowed. " You'd be
amazed at the difference that makes in reducing the number of
loans participants take, " Griffin says.
Roth Feature Usage
Most of CSI Advisory Services' clients now offer a Roth feature in
their 401(k) plan, Baker says. " We're finding that the Roth slice
can really make a difference in participants' results. "
Because participants pay tax on their Roth contributions as
they go in, Austin says, a $1 contribution is effectively worth at
least $1.25 when a participant later withdraws the money, taxfree.
" So you need to treat Roth contributions differently than
pre-tax contributions, because they're worth more, " he says. " I
think it's a particularly acute issue right now: Tax rates have gone
down [this year], but that's set to expire in 10 years, so tax rates
will go up in the future. "
Austin suggests keeping a close eye on data, including how
many employees make Roth contributions within the plan, how
much they contribute, and whether they convert pre-tax 401(k)
savings into Roth savings. " Our research shows that the people
who use the Roth feature most are the youngest employees, the
Millennials, " he says. " Millennials are now at the lowest income
they are going to make and are in the lowest tax bracket they'll
be in during their career. And they're the employees who have
the greatest uncertainty about the future, because they have the
longest time frame. So employers are starting to think about Roth
as a way to start Millennials on engaging with the plan. "
Fiduciary Plan Advisors at HighTower has even started
talking with some employers that have a predominately young,
low-paid workforce about defaulting employees into their plan's
Roth feature instead of into pre-tax savings. A current obstacle for
this concept-which could cover all new employees, or just those
born after a certain date-is that providers are not yet set up for
after-tax auto-enrollment, Stout says.
" But just because we've always done pre-tax auto-enroll, it
doesn't mean that's always the right way to do it in the future, "
Stout continues. " If we're going to default employees, the thought
process for the sponsor should be, 'What's going to be the best
solution for them?' "
Financial Wellness Program Engagement
For participants, having a handle on basic financial-planning
issues when they retire is just as important as how much money
they have saved in their account, Stout suggests. " If people
go into retirement without some sort of budget, they're going
to have issues, " she says. " They may have a pile of money, but
they're not going to understand how to spend it. "
However, the industry has yet to devise a way to firmly
quantify for employers the bottom-line impact of paying for a
program that teaches financial basics, Cicalese says. " I don't
think we're there today-it's evolving as we speak. So we can
[instead] look at the results qualitatively. "
It takes time to see quantitative results, and employers get
antsy about it, Stout agrees. " That's when we have to rely on
getting [qualitative] feedback from the individuals who've been
through the program. " That means survey questions such as this:
How confident do you feel that, if you retire in the next five years,
you'll have enough money saved to live comfortably thereafter?
" It's more a feeling than anything. It's less about looking
at the results in terms of math and more about the experience
of individuals going through the program, " Stout says. " We've
focused so much as an industry on the math side and not on the
behavior side. "
Atlanta Retirement Partners spent substantial time in the
past year doing a deep dive to identify the main financial stressors
of its clients' employees. Griffin says, for younger employees, their
debt level ranks highest-especially for those with burdensome
student debt. " We have realized that assisting these employees
with their debt level is as important as helping them save for retirement, "
he says. ARP has a year-long " boot camp " financial wellness
series, which can include participant access to a debt-consolidation
service and an employer match for program participants
paying down their debt.
" We believe it's a good, long-term retention tool for employers, "
Griffin says. " But the ROI [return on investment] on financial
wellness is difficult for employers to figure out. " So throughout
the course, ARP monitors data such as attendance, plus it surveys
participants about how the program is affecting them.
CSI Advisory Services, too, closely tracks engagement, such
as how many program participants took steps to improve their
retirement outlook as they went through its program. " We look
at last year's results and this year's results, and did the program
make an impact? If not, what changes do we need to make? " Baker
says. " Participants taking action is important. Without it, I don't
know that a program like this is that effective. " -Judy Ward
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