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6 New Year’s resolutions for 401(k) plan sponsors

A few changes can make your good 401(k) plan into a great one. To help your 401(k) plan achieve greatness, consider resolving to have the following in place by year-end.
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1. Financial wellness education

The greatest source of stress for your employees is financial. A 2016 Purchasing Power study reports that 43% of the surveyed group experienced at least some stress from financial issues. The report also indicates that one-third of workers have trouble meeting monthly expenses and that 41% don’t have a budget. And bad news for you: The study found that 37% of employees spend time at work dealing with personal finance issues.

This is a benefit that your employees would welcome. A 2014 MetLife study indicates that nearly half of all employees surveyed were interested in having financial wellness programs in their workplaces.

Not sure where to find financial wellness education providers? Consider referencing the Program Evaluator that T. Rowe Price has developed. The experts at T. Rowe Price have researched the universe of financial wellness providers and boiled the list down to the 14 that appear to be best-in-class. If you want to RFI the three or four best, T. Rowe has constructed an RFI template for you to use as well.

Not sure how to roll out financial wellness education in your workplace? Consider marrying it to your existing 401(k) employee education program.
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2. The right investment adviser

New fiduciary rules will become effective for 401(k) plan investment advisers in April. Most experts believe that these rules will not be repealed by President Trump. These regulations are very positive for 401(k) plan sponsors. Do you know whether your 401(k) plan investment adviser is signed on as a true fiduciary? Is he or she subject to a BICE agreement that you will need to sign? Is your investment adviser objective, or have you been receiving conflicted advice? You owe it to your participants to provide them with the best investment options. Make sure this year that you are working with an adviser who has your best interests in mind.
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3. A guaranteed rate or stable value option

No plan sponsors offer a money market fund in their 401(k) plans anymore, right? You might be surprised at the number of plan sponsors that still do. Not only have prime money market funds become subject to gates and redemption fees, but their NAVs can vary as well. That means it is now possible to lose money in a prime money market fund. Think a government money market fund is the answer? Those funds have an even lower yield than prime money market funds. Your employees deserve the opportunity to invest their money safely, without the prospect of loss and with a reasonable return. Make sure your 401(k) plan provides a guaranteed rate or stable value investment option.
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4. Participant investment advice

Many recordkeeper platforms provide the functionality for plan sponsors to offer investment advice options to 401(k) plan participants. Some offerings are of the robo-type, some are algorithm-based and others, like financial engines, tend to be expensive for smaller-balance employees. Providing access to these services for your employees is the right thing to do. Costs range from free to expensive. Many recordkeepers provide the option of free services along with a fee-based option, allowing your employees to decide which is best for them. Investigate this option with your recordkeeper.
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5. Full automation

Auto enrollment and auto escalation work. They are important plan design elements that move employees who would otherwise not participate into 401(k) plans and increase the contributions of those who wouldn’t contribute enough. These features also make your life easier from an administration standpoint. Go fully auto this year and implement both. Ascensus reports that less than 1% of its auto-enrolled participants opt out.
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6. At least one balanced investment option

Many of your participants would rather let experts allocate their account balance among equity and fixed-income investments. Provide your employees with the option to achieve diversification in their accounts by investing in just a single fund in your plan. Offer a balanced fund or target date series.

Plan sponsors that address these 401(k) plan opportunities in 2017 will be rewarded with leading-edge 401(k) plans.}
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