PLANSPONSOR - October/November 2019 - 43

participants are willing to share at least one piece of personal
data, " Jordan says.
The company then tells sponsors what percentage of their
workforce is heading for a successful retirement. Across its
book of business, 72% of the workers in its plans are on track,
she says. At some plans, as much as 85% of the workers save
sufficiently, she says.
Unified Trust updates its plan sponsor clients on the overall
outlook for their plan, every quarter. " We look for changes in
participation and deferral rates as well as the percentage on
track, " Jordan says. " We call these the 'Key Acceptance Rates.'
Sponsors are very interested in those numbers, as well as how
many people have given us additional information. "
Likewise, Alight Solutions has always integrated account
aggregation on its platforms, including both of its advisory
solutions, WealthSpark™ and Professional Management,
says Virginia Maguire, vice president, wealth products, at the
company in Atlanta. Alight's position has been, " By seeing only
a portion of [people's] financial standing, it's very difficult to give
them support [as to their] savings needs and investment strategies,
because you only see the narrow picture, " she says.
Like Betterment for Business and Unified Trust, Alight
shares plan-level statistics with its clients. This often leads sponsors
" to pull all sorts of plan design levers or to focus on certain
demographic groups that need help, " Maguire says.
The participant-level information is also instructive for the
salaried, unconflicted advisers whom Alight provides to its plans,
Maguire says. " If they have information about outside accounts,
this can help the advisers make the right recommendations for
participants, be those to save more, retire at a different date,
invest differently or plan on a different Social Security strategy, "
she says. " All of these can get participants into a better situation
and even guide the adviser on where they should begin drawing
down their money, to optimize their taxation strategies. "
Participant Liabilities Are Also Key
But if a sponsor is going to offer an account aggregation solution
to its workers, that solution must take in a whole host of factors,
says Neil Lloyd, head of U.S. defined contribution and financial
wellness research at Mercer in Vancouver, Canada. Presently,
he maintains, account aggregation tools fall short of doing this.
" Many of these tools focus only on the assets, " he says. " The
question that doesn't get asked is what liabilities do people have?
Do they have a mortgage? Are they married? Will they continue
to work? Do they have children headed for college? The challenge
with all of these exercises is they will fail to be a good guide for
any specific individual in terms of how much that person will
need-unless he considers all of these variables. "
Additionally, in Lloyd's experience, account aggregation
tools do not update frequently, and one or more of the accounts
on the platform tend to " disrupt " the findings, leading to an
incomplete picture for individuals, he says. " There are also
concerns about data security, as these systems ask people for
their account numbers and pass codes. While, in principle,
account aggregation tools are the right thing to do, they just don't
work that well. "
Big Data as an Alternative
For plan sponsors averse to having their recordkeeper or adviser
ask their workforce for additional financial information, another
way to estimate its retirement preparedness is " big data " analysis.
" Because of the high degree of sensitivity from both the
participants' and plan sponsor's standpoint about confidentiality,
we use a research-based approach to get estimates, based on
surveys we conduct and information from the Federal Reserve, "
says Shane Bartling, senior director, retirement, at Willis Towers
Watson in San Francisco. " This can give us a reliable estimate of
participants' outside holdings and a refined outlook on a plan's
retirement readiness outlook. "
Willis Tower Watson's estimates can also take into consideration
the tax treatment of the various vehicles participants
are apt to be invested in, such as Roth 401(k)s, Roth individual
retirement accounts (IRAs) and health savings accounts (HSAs),
Bartling says. Further, the consultancy considers Social Security
benefits and medical costs in retirement, the latter of which
could account for 20% to 25% of a retiree's expenses, he says.
" Using these types of analytics, we can arrive at a very reliable
estimate for the projected retirement income and retirement
readiness of a plan's participants, " Bartling says. Willis Towers
Watson can then do a deep dive with sponsors on " the design of
their plan, such as whether or not it should incorporate automatic
enrollment and escalation, as well as the types of tools, technology,
communication and advisers that can effectively help participants
prepare for their income needs in retirement. "
Sometimes, if the employee base is not on track, the firm will
discuss with the sponsor " [whether] it's willing to have a significant
portion of its workforce continue to work, " he says.
Bartling says it is critical for sponsors to have an accurate
overview of how well their plan is preparing workers for retirement.
" Otherwise, they could have a distorted view of how their
plan is operating, and that could then lead to inaccurate conclusions
on the types of education, technology and adviser support
to provide, " he says. " These estimates on outside assets have also
been used to find TDFs [target-date funds] with glide paths that
are appropriately calibrated for the workforce. A wide range of
applications that are central to the oversight of a retirement plan
are influenced by these estimates of retirement income. "
Whether participants willingly divulge the details of their
finances in an account aggregator, or the sponsor turns to big
data to estimate what they hold, having complete information is
crucial. Only by obtaining and using it, will sponsors be able to
judge whether their workforce is on the right road. -Lee Barney
PLANSPONSOR.com October - November 2019 43
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