Engaging 401k Participants
Although 80% of the benefits to prepare people for retirement can come from plan design, especially if defined contribution (DC) plans use the recommended ideal plan, engaging 401k participants is equally important. Daniel Bryant, CEO at Sheridan Road, and a TPSU Adjunct Lecturer explains how they work their 300 DC clients which includes a half million participants to increase engagement.
Just like with the underlying business, companies need to develop a strategic plan to help people retire on time. Because, as we are discovering, if people are not financially prepared to retire, they keep working increasing costs while lowering overall productivity and morale. So along with creating an investment policy statement (IPS), which provides a road map for selecting and monitoring funds as well as instituting proper fiduciary controls to mitigate liability, according to Bryant, companies should consider using an educational policy statement (EPS).
The EPS will define how a company plans to not only educate employees in the company’s DC plan but also how they plan to engage them. Each company is a bit different and the needs of the employees change as they mature and their financial position evolves. Plans need to have the resources to deploy an entire curriculum to meet the various needs of each group. Most effective but also costly is one on one meetings where employees can get personalized guidance.
The newly released DOL rule is changing the rules on how advisors interact with plan sponsors and especially with their employees. Though the definition of education v. advice was broadened in the revised rules, most plans and participants need advice which means that the advisor will be required to act as a fiduciary in the best interest of their clients. Be sure to know if your advisor is willing to not only act as a fiduciary but also has the experience and resources to adequately serve in that role.
