Outlined contribution (DC) plans are among the many most typical methods for US employees to avoid wasting for retirement. US DC plan programs totaled $9.6 trillion in assets as of the third quarter of 2023 when they represented 22% of all US retirement assets. This creates large duty for plan sponsors as they supply and handle retirement advantages on behalf of their staff.

To assist plan sponsors, we curated seven matters that we imagine they need to make prime priorities for his or her retirement applications in 2024.

1. Full a Complete Goal Date Fund (TDF) Evaluation

Goal date funds (TDFs) are a distinguishing function of DC plans: 85% of plan sponsors offer them. These funds robotically rebalance to turn into extra conservative as members close to retirement. For that reason, TDFs enchantment each to plan members searching for a hands-off method to managing their retirement financial savings and to plan sponsors that use such funds as their plan’s certified default funding different (QDIA).

In actual fact, of the 80% of plans with a QDIA, 86% of them use a TDF. In consequence, plan members usually have their whole account balances invested in a TDF. This makes a robust choice course of in addition to diligent and ongoing monitoring completely important.

The US Division of Labor’s (DOL’s) steering “Target Date Retirement Funds — Tips for ERISA Plan Fiduciaries” outlines TDF choice finest practices. Plan sponsors ought to assessment the entire steering earlier than evaluating their TDF. In our personal studying of the steering, we recognized three vital questions that plan sponsors ought to ask themselves. Collectively, they function a litmus check to find out if a TDF assessment may be warranted sooner relatively than later:

Did your preliminary evaluation of funding choices think about your company-specific workforce demographics?
Did your preliminary evaluation embrace an analysis of a number of TDFs?
Have you ever reviewed your TDF choice, past regular efficiency monitoring, inside the final three years?

If the reply to any of those questions is not any, plan sponsors could wish to prioritize a TDF assessment in 2024.

2. Trending and Stylish vs. Helpful and Mandatory

Articles, convention classes, and webinars that herald new concepts that can make DC plans “higher” will be distracting and sometimes blur the road between advertising and thought management.

For example, traditionally, most retirement planning communications have emphasised accumulation. Prior to now two years, they’ve expanded to “decumulation” methods that target what occurs after retirement. This has created a wave of sponsored content material selling in-plan annuity or “lifetime revenue merchandise.” Regardless of the supposed recognition of such merchandise, only 9.9% of plans actually offer them to their plan participants.

The trade is within the midst of a fast innovation cycle propelled by the Setting Each Neighborhood Up for Retirement Enhancement (SECURE) 2.0 Act of 2022, elevated competitors amongst service and product suppliers, and different secular developments. It’s an thrilling time, and far of what’s being developed could serve plan members properly sooner or later. However plan sponsors have to keep up their self-discipline and embrace a holistic, goals-based method once they consider trending DC plan merchandise, options, and options.

3. Provide Complete Worker Monetary Training Assets

To recruit and retain prime expertise, plan sponsors should customise their monetary training technique to the wants of a various and evolving workforce. Completely different generations of employees have interaction with academic content material in numerous methods: Some want in-person conferences, movies and articles, or one-on-one classes. What resonates with somebody early of their profession could not work for somebody approaching retirement. In consequence, plan sponsors should goal, differentiate, and range their training strategies to interact all their staff.

A well-managed retirement plan supplemented by complete monetary training sources is usually a important recruiting and retention software. Our shoppers have loved the best success when our worker training consultants work with our retirement plan advisers to construct annual training campaigns that incorporate the various wants of their staff. A little bit little bit of planning goes a great distance in bettering participation, engagement, deferral charges, and different vital metrics.

4. Deal with Holistic Monetary Wellness

Final yr, inflation and the specter of a looming recession had been prime of thoughts for a lot of People. Three statistics from a recent PNC survey of corporations and their employers emphasize this:

Seven in ten staff reported feeling monetary strain that negatively impacted their work.
Three of 4 employers reported that staff’ monetary stress affected operations, resulting in lowered productiveness, decrease morale, and decreased efficiency.
Almost one in 4 (23%) survey members spoke with a monetary adviser within the earlier three years.

Plan sponsors may also help staff with their monetary well-being by making their retirement plans greater than only a car for saving. A nuanced emphasis on monetary wellness can’t solely enhance worker monetary well being but in addition foster larger productiveness and expertise retention. Offering entry to group training classes in the course of the workday, encouraging the usage of calculators and different on-line recordkeeper instruments, and facilitating particular person consultations with monetary educators are all useful steps.

5. Consider Your Recordkeeper

The recordkeeper trade is quickly consolidating whereas struggling to maintain up with a extremely energetic regulatory setting. Whereas some recordkeepers are assembly the problem, others are falling behind. As a part of their fiduciary obligation, plan sponsors should commonly consider suppliers on two key dimensions:

Companies and Merchandise. Plan sponsors analyze the companies rendered to find out in the event that they want enchancment. For a recordkeeper’s participant web site, amongst different merchandise, plan sponsors would possibly survey members and even personally check the expertise. They need to doc these findings as a part of assessment conferences not less than yearly and save them in a fiduciary file for future reference.
Charges. A great payment analysis course of compares what a plan expenses relative to different plans of comparable dimension in property and members that present comparable companies to the same variety of individuals. We have interaction an unbiased payment benchmarking service to offer this info to our shoppers that they’ll then save of their fiduciary file.

If recordkeeping relationships are usually not assembly their requirements, plan sponsors ought to discover whether or not different suppliers are higher matches.

6. Defend Cyber Safety

Because the quantity and class of cyberattacks enhance, organizations are educating themselves on how finest to guard themselves in opposition to fraud. Final yr, 88.2% of DC plans initiated cyber security actions. Plan sponsors and members want to remain updated on the DOL’s cyber safety steering. For plan sponsors, the DOL’s “Cybersecurity Program Best Practices” is a useful start line.

The DOL steering highlights plan information as a central concern. We advocate plan sponsors consider their inside finest practices in addition to these of recordkeepers and different plan distributors.

Plan sponsors ought to think about asking their suppliers yearly for details about their cybersecurity practices. Reviewing and documenting that information and storing it in a fiduciary file is a straightforward finest follow to implement. Plan sponsors would possibly take it one step additional and work with their recordkeeper to distribute participant-focused communications to enhance digital hygiene. In our expertise, calls to enhance cybersecurity practices have an additional benefit: They encourage plan members to log in to their accounts and interact with their retirement plans.

7. Governance and Compliance Refocus

The SECURE 2.0 Act of 2022 obtained detailed protection in 2023 and drew appreciable consideration and bandwidth all year long — generally on the expense of different initiatives and finest practices. Plan sponsors could have postponed evaluating the recordkeeping panorama, conducting a TDF assessment, or analyzing plan design relative to rivals, amongst different initiatives.

The excellent news is that getting again on observe is simple. Plan sponsors ought to set up their goals and set deadlines to make sure they’re taking steps to fulfill them. We advocate plan sponsors construct a 2024 guidelines with their adviser and get to work on checking off the bins as quickly as attainable.

Conclusion

Plan sponsors serve a important function in managing retirement applications in a means that helps create optimistic retirement outcomes for plan members.

By protecting these seven priorities entrance of thoughts, plan sponsors can focus their efforts the place they’ve the potential to do essentially the most good.

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