SUMMARY
A truly excellent retirement plan benefits both employees and employer. Regulatory compliance is the baseline of excellence—not the finish line. In this series on “going beyond the regulations,” we cover best practices across six areas:
- Fiduciary Governance
- Plan Design
- Fee Structure
- Investment Process
- Participant Support
- Provider Management
Each entry in the series is anchored by a quick-reference table of best practices. We also share examples drawn from our professional experience with real-world insights and tangible strategies. We invite you to join us as we explore the nuances of creating and maintaining an outstanding retirement plan.
Financial stress impacts employees across all sectors
At the heart of participant support is the understanding that financial stress affects employees in every sector and at all levels. This stress not only impacts personal lives but also leads to reduced productivity in the workplace. Assisting employees in their retirement planning journey is more than a benefit; it's an opportunity to help them navigate various financial challenges. This comprehensive approach can establish a company as an employer of choice.
Participant support is a blend of education and financial wellness. It involves guiding employees through specific financial decisions and actions, from considering a 401(k) loan to navigating other personal financial strategies.
- Participant education: This is the bedrock of the support system. It encompasses fundamental concepts such as the mechanics of 401(k) plans, stocks, bonds, and understanding employer contributions.
- Financial wellness services: These services personalize the foundational knowledge, offering advice tailored to individual situations and life stages. Annual financial wellness surveys are integral to this process. Rather than making assumptions, these surveys actively seek employees' input to develop relevant and timely support programs.
A critical aspect of effective participant support is the availability of digital financial planning tools. These tools empower employees to forecast their retirement savings, budget efficiently and manage debt. While these tools are increasingly common, their effectiveness and impact can significantly differ.
Here are two real-life examples that illustrate the need for participant support and why doing it well can make such a difference to employee well-being.
Example 1: Physical therapists’ group
This Wisconsin-based organization has about a hundred plan participants, many of which are early to mid-career physical therapists. These therapists typically earn a comfortable salary—but they can find themselves pinched as their lifestyle changes after years of schooling. Many have some personal credit-card debt on top of substantial student-loan payments.
These plan participants are highly capable professionals but are inexperienced in financial matters. In our participant-education work with this client, we’ve seen therapists benefit tremendously from financial basics, such as budgeting and goal setting. We work to make sure each person has the tools they need to navigate financial change. In our experience, plan participants take better advantage of their plan as they gain more confidence about their overall financial lives.
Example 2: Manufacturing business
Whereas the prior example dealt with earlier to mid-career employees, this one focuses on a pre-retirement factory employee. He was thinking of retiring but unsure about next steps and his financial stability.
During a series of individual meetings, we established that he was—and long had been—a healthy saver. We helped ensure he didn’t cross the IRS limits and, to accommodate more tax-advantaged savings, we helped him establish an individual Roth IRA account to complement his workplace 401(k). We also reviewed his outside savings and obligations.
We determined that thanks to a paid-off house and solid savings, he could choose to retire a little earlier than he’d envisioned if he chose. This is an excellent example of someone who wasn’t experiencing actual financial stress but was nonetheless carrying a mental burden about his finances.
Best practices for participant support
Now let’s turn to best practices, highlighted in the following table. Best practices for participant support that goes beyond the regulations.
Access to Robust Digital Financial Planning Tools
What it is: Providing participants with digital tools for retirement projections, budgeting, and debt management.
Why it matters to the business owner: Enhances the value of the retirement plan by offering comprehensive planning resources.
Why it matters to employees: Empowers employees with tools to manage their financial future, fostering better retirement planning and financial literacy.
Financial Wellness Solution
What it is: Offering a program that addresses various aspects of financial wellness, beyond just retirement savings.
Why it matters to the business owner: Demonstrates a holistic approach to employee well-being, potentially improving job satisfaction and retention.
Why it matters to employees: Provides resources and support for broader financial health, addressing needs such as savings, debt management, and budgeting.
Annual Financial Wellness & Well-Being Survey
What it is: Conducting yearly surveys to gauge employees' financial wellness and needs.
Why it matters to the business owner: Inform plan improvements based on employee feedback, aligning benefits with actual needs.
Why it matters to employees: Gives employees a voice in their financial well-being, ensuring the plan evolves to meet their changing circumstances.
Access to Fiduciary Advice and/or Education
What it is: Ensuring participants can receive fiduciary advice and educational resources about their retirement planning.
Why it matters to the business owner: Upholds a high standard of care and advice, enhancing the credibility and effectiveness of the retirement plan.
Why it matters to employees: Offers employees reliable, unbiased financial guidance, increasing their confidence in managing retirement savings.
1:1 Access with a Qualified Fiduciary Advisor
What it is: Providing opportunities for participants to meet individually with a qualified advisor who serves in a fiduciary capacity.
Why it matters to the business owner: Personalizes the support offered, showing a commitment to individual employee needs.
Why it matters to employees: Allows for tailored advice that aligns with personal financial situations and goals, leading to more informed decision-making.
Access to Robust Digital Financial Planning Tools
What it is: Providing participants with digital tools for retirement projections, budgeting, and debt management.
Why it matters to the business owner: Enhances the value of the retirement plan by offering comprehensive planning resources.
Why it matters to employees: Empowers employees with tools to manage their financial future, fostering better retirement planning and financial literacy.
Next steps
Building on the foundation of Fiduciary Governance, we’ve now moved through several focus areas on our way to the last topic of Provider Management.
