What Are Employers to Do? Reflect, Prepare, and Protect
Business leaders agree: now is the time to pause, reflect, and support employees while protecting the company’s future.
The ongoing health and economic crisis creates urgency for business owners to simultaneously take care of employees while preparing for an uncertain future.
Employers who want to continue to attract and retain talent, while still being accountable to executives and stakeholders, need to turn their attention to evaluating their outside partners. As an employer, are you receiving the right value and protection for the price of your benefits package?
The Importance of the Right Partner
When selecting a partner or vendor, ask the following questions:
- Do they understand our business?
- Do they have resources to understand the specific challenges of our industry?
- Will the vendor help us better understand what influences our cost?
- Can they support us in educating our employees?
What Your Current Providers Should Be Doing
Karen Schwartz, insurance account executive at Parker, Smith & Feek, recommends that employers evaluate their relationships with providers:
“In this unique environment, people are thinking about their health and how they access care maybe more than ever before. Employers can show stability to their employees by creating an employee benefits package that supports overall wellbeing in a changing world. Understanding the key drivers in insurance costs becomes even more important. This comes from transparency.”
It is crucial to have a pulse on how insurance claims are running throughout the year, especially during a changing health care environment. “You can’t understand the spend unless you understand where it’s being spent,” Schwartz says.
Moreover, partnering with a transparent financial advisor on your retirement plan will allow you to transform this benefit into a dynamic and customizable financial wellbeing resource for employees.
Do employees have a trusted resource for their financial questions? According to a recent Employee Benefit Research Institute survey, “68 percent of workers said they wanted comprehensive financial planning to help them … figure out how much they need to save for their post-work years.” Ideally, employees would have access to a CERTIFIED FINANCIAL PLANNER™, someone trained to advise on a wide array of financial matters. Providing this and other benefits would put you a step ahead, making it easier for you to recruit and retain talent now and in the future.
Finally, did your retirement plan investment advisor reach out to you recently? As you know, recent market volatility introduced significant business continuity issues. If you did not hear from your providers (administrator, recordkeeper, advisor, benefits broker, etc.) in the last month or two, it is probably time to reassess the relationships.
Prepare and Protect
Evaluate all benefits in terms of “value” and look for ways to lower costs in other areas. Have an independent review prepared to confirm that you are getting the best value for your dollars.
One component of value is cost. Retirement plan costs consist of layers worthy of periodic review. Optimizing retirement plan costs may free up company resources for other worthy benefits.
- Internal investment expenses: the underlying cost of investments
- Share class selection: retirement plans often have access to preferential share-classes, but only when elected
- Revenue sharing: be cautious of providers that receive indirect compensation and commissions
- Fiduciary risk exposure: some employers are unaware of all the risks and how to mitigate their exposure
Independent Plan Benchmarking
When was the last time you benchmarked your plan? As a plan sponsor, you should review fees every 2-3 years. The Employee Retirement Income Security Act (ERISA) mandates that 401(k) and 403(b) retirement plans sponsors meet certain basic standards to ensure participants’ assets are managed responsibly.
ERISA does not require the lowest fees but does require that plan sponsors operate prudently, follow plan documents, diversify plan investments, and pay only reasonable plan expenses. The Department of Labor’s booklet on 401(k) plan fees urges plan sponsors not to consider fees in a vacuum. Fees are only one part of the bigger picture, including investment risk and returns, as well as the extent and quality of services provided.
The Dangers of Autopilot
Employers cannot expect a retirement plan to run on autopilot when businesses and employees continue to change.
Has the number of employees changed in the last few years? Up or down? Has inertia or other urgent matters kept you from reviewing the plan periodically? Do you know if plan costs are reasonable for the scope of plan size, and services received?
Increasing retirement planning services could provide financial wellbeing for plan participants, often for the same or lower cost. The best way to know is to have an independent plan benchmark prepared.
A Simple, Complimentary Benchmark for Your Plan
Let us help you see how your plan stacks up. Our team of fiduciary retirement plan advisors is available today. Here is our process:
- Discovery call (or Zoom) – This is a brief 30-minute call to learn about your business and what is important to you.
- Documents – We only need a few documents to analyze independently on your behalf.
- Planning call (or Zoom) – We will share our findings and discuss next steps to make sure you are meeting your plan sponsor obligations.
Brighton Jones operates as a fiduciary 3(38) Plan Advisor. We work with your existing providers (e.g., administrator, recordkeeper, and custodian) and insulate you, the plan sponsor, from fiduciary liability to the full extent allowable. We benchmark providers, provide an independent analysis, and negotiate on your behalf to optimize cost, benefit, and value.
Ready to maximize the value of your benefits? Request an independent retirement plan benchmark from Brighton Jones.