PLANSPONSOR - October/November 2020 - 19

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Whether they choose a conservative or aggressive default
investment, plan sponsors need a firm understanding of why
they are using the approach they have chosen, McKinlay says.
" For example, we are strong believers in using indexing in
target-date funds: Indexing may help avoid the potential underperformance
of active management when the market goes up,
and the under-performance of active management when the
market goes down. " In addition, he says, index funds typically
have lower fees. " We believe that, over the long term, that will
offer participants a more favorable experience. "
This year's market volatility has given CSi Advisory Services
an opportunity to talk again with committees about whether their
plan has target-date funds with the right glide path design for their
participants. That is partly an issue of the more aggressive investment
philosophy that a " through " fund tends to take, versus a " to "
fund, Davis observes. " And if we're in the right glide path, are we
in the right fund family? Some fund families are much
more aggressive than others, especially as people get
closer to retirement. "
Levine says this also is a good time for plan
committees to ask themselves: Did our investment
policy statement (IPS) work well this year,
amid the volatility? There is no set of volatility
metrics that ERISA or Department of Labor
(DOL) regulations require plan fiduciaries to regularly
monitor, he points out. " I believe in utilizing a
limited number of metrics-and metrics that allow you
to have flexibility. You do need more flexibility for gyrations like
these, " he says. That way, a committee is not boxed into making
fund changes in response to short-term volatility. " This is where
I encourage committees to look at their processes, " he says. " The
key is to make sure they're workable in times like these. "
4) Participant-Engagement Specifics
It is key to understand not just overall data such as how many
participants contacted a call center, but on what topics they sought
help. " Every time a participant calls in to our office, we're tracking
that conversation: not the details of the conversation, but the topic, "
Davis says. " Then, we comb through that data for each plan, and
usually that determines our education strategy for that plan. " This
year, in response to participants' questions when calling in, her
company has done additional, virtual group education on topics
including budgeting and investment diversification.
This year's participant-engagement data can lead to next
year's education focus areas, whether for virtual or in-person
meetings. Asked about employers starting to plan for education
next year, McKinlay says it really depends on an employer's
situation. " If all of a company's employees have been working
remotely, that's a more favorable environment for continuing
to do group meetings, because you can get a group together
safely, " he says. " At other companies, in industries such as
manufacturing, where employees are working on-site, they
are still presented with a problem: How do they get everyone
together in a room safely? "
To get a better feel for participant engagement online, sponsors
are looking at data such as the number of participants who
accessed the participant website, which pages on the site they
looked at, and the attendance at virtual workshops, Thompson
says. Fidelity can then cut that data by factors such as an employer's
different locations and employee demographics.
When looking at data, Austin cautions, do not assume that
less participant engagement is always worse. For example, it may
be a positive if only a few of a plan's participants accessed their
site to change their investment allocation this spring. " You have
to almost look at engagement in terms of: What's the long-term
goal? " he says. During times of a market downturn or a crisis,
it is to stay the course with retirement saving and investing. " So
if people were, quote/unquote 'not engaged,' that was not necessarily
worrisome, " he says.
But where participants did take worrisome
action this year, Austin suggests the sponsor think
about working with the plan's recordkeeper to
craft messages that help these employees avoid
repeating mistakes. For example, say that this
spring, an unusually large percentage of a plan's
participants traded out of equities into very conservative
funds. " You can set a message that's triggered
to appear on the participant site if the market drops at
least 5% in a day, he says. It can remind participants that
those who remained in equities in the spring 2020 market-drop
subsequently saw a big rebound. "
5) Plan-Level Services
Levine has a few suggestions as to what to evaluate about a recordkeeper's
plan-level services this year. " No. 1 is how did they handle
the CARES Act provisions? Different recordkeepers adopted
different approaches and were proactive to different degrees, "
he says. " No. 2 is fees for the services received. And No. 3 is the
quality of the services received and evaluating any service-level
guarantees. " If a plan has any specific service standards in its
service agreement with the recordkeeper, has the recordkeeper
met those standards this year? If not, sometimes there is a
discount, or rebating of fees, he says. " And fourth, there are many
new services coming around that may be worth evaluating, such
as student debt programs, " he says.
In a challenging year such as this, good plan-level reporting
also plays a key role in helping sponsors understand how their plan
has fared. " Every single client is trying to get an understanding of
the COVID loan and distribution activity in their plan, " Schroeder
says. " Recordkeepers did provide reporting on that, but there was
a disparity in what they could provide. Some provided it, and other
recordkeepers tried to be helpful, but they couldn't articulate
things such as whether certain distributions were due to COVID
withdrawals. " -Judy Ward
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