Thinking into the year ahead, plan sponsors across the country are looking at expanding investment lineups, maximizing services and enhancing participant education. According to the 2024 Morgan Stanley Retirement Plan Survey, these are the three primary ways retirement plan sponsors are seeking to evolve their strategies.
Guidance, Options, Education
At Plan Sponsor, Jeremy France, head of institutional consulting solutions at Morgan Stanley, observes that sponsors “are facing mounting pressure to offer more comprehensive strategic benefits packages,” and shares these related insights based on the company’s annual survey:
The relevance and demand for professional guidance is on the rise, with more than 80% of plan sponsors relying on consultants to navigate the complexities of the current financial markets….Moreover, the nature of these relationships is transforming, with indications of a shift in the structure of consultant arrangements toward higher-touch services….
If working with a professional consultant is the first key ingredient for today’s plan sponsors, the second is expanding investment options—with more than a third planning to increase their offerings….The challenge here lies in the nuts and bolts of driving change within an investment lineup. Practically speaking, expanding fund choices can also increase the administrative burdens. No wonder roughly one in four plan sponsors said it’s somewhat difficult to change their investment lineup, citing their top challenges as communicating and educating plan participants on changes, handling regulatory filings, and covering the cost of moving assets.
While providing strong options for plan participants is key, so too is making sure participants have a clear understanding of the choices on their path to retirement, which is why Morgan Stanley finds that many plan sponsors are looking to enhance educational services associated with the company retirement plan:
Of course, the best laid retirement plans don’t mean anything until participants use them. Given the complexity of today’s retirement plans and the financial landscape we face as we age, an overwhelming majority of plan sponsors agree that educational materials and tools to engage participants are crucial. To support the success of their retirement plans, 85% of sponsors provide online retirement planning tools, 74% provide online account review and analysis tools and 73% distribute written education content through their 401(k)s. Additionally, consultants and plan advisers are now the most common source for participant educational resources, with nearly half of plan sponsors turning to their consultants for these services. This trend is expected to continue as consultants increasingly incorporate participant education into their offerings.
Good To Remember: Prudence and Loyalty
Whenever assessing plan options and making decisions, plan sponsors are wise to keep their fiduciary obligations, front and center. Specifically, plan sponsors must “be sure they understand any option before selecting it” and clarify the benefits and costs for participants:
Despite all the new products available to plans, “underneath it all, the same standards apply: prudence and loyalty,” says David Levine, a partner in the Groom Law Group, referencing the core fiduciary obligations under ERISA. The retirement world is constantly evolving, and “there are always new solutions as people try to address what people perceive as room for enhancement,” Levine says. Sponsors should evaluate the direct and indirect costs, the outcomes and the recordkeeping requirements of any option they are considering.
When it comes to fees associated with lifetime income products, sponsors should ask themselves, “in light of these fees, are the benefits to the plan and participant worth it?” There is no right or wrong answer, necessarily; a fiduciary just needs a prudent process for deciding and a “basis and rationale” for the final choice.
Even while acting as diligently and prudently as possible on behalf of the plan and participants, sponsors also need to remember they can be held personally liable in the event of a fiduciary breach. Moreover, although ERISA bonds are required by the DOL, they do not protect plan sponsors. Colonial Surety offers a convenient and affordable package, tailored especially to help plan sponsors mitigate their risks.
Armed with our Fiduciary Liability coverage, for a few dollars a day, you’ll have defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber liability coverage is included at no extra cost, providing additional protection–for the plan and company–against regulatory actions related to data and privacy, as well as expert response services. Our packages are available for 1, 2, and 3-year terms, providing flexibility and locked-in rates:
Liability Insurance for Plan Sponsors HERE
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