Table of Contents
You probably already know that Defined Contribution (DC) plans are among the most common ways for US workers to save for retirement. This creates tremendous responsibility for plan sponsors as you provide and manage retirement benefits on behalf of your employees. To help our plan sponsors, we came up with four areas that we believe should be top priorities for their retirement programs in 2024.
1. Complete a Comprehensive Target Date Fund (TDF) Review
Target date funds (TDFs) are a popular feature of DC plans: 85% of plans offer them1. These funds automatically rebalance to become more conservative as participants age. For this reason, TDFs appeal both to plan participants seeking a hands-off approach to managing their retirement savings and to plan sponsors that use such funds as their plan’s qualified default investment alternative (QDIA). In fact 86% of plans with a QDIA use a TDF2. This makes a strong selection process as well as diligent and ongoing monitoring absolutely essential.
If you haven’t made it a point to evaluate your TDF’s recently, this is a great time to do so. There are three important questions that you should consider as you review your TDF selection:
- Do your investment options consider your company-specific workforce demographics?
- Have you evaluated multiple TDFs?
- Have you reviewed your TDF selection, beyond normal performance monitoring, within the last three years?
If the answer to any of these questions is no, you may want to prioritize a TDF review in 2024.
2. Trending and Trendy vs. Beneficial and Necessary
Articles, conference sessions, and webinars that tout new ideas that will make DC plans “better” can be distracting and often blur the line between marketing and thought leadership.
As an example, historically, most retirement planning communications have emphasized accumulation. In the past two years, they have expanded to include strategies that focus on what happens after retirement. This has created a wave of content promoting in-plan annuity or “lifetime income products.” Despite the supposed popularity of such products, only 9.9% of plans actually offer them to their plan participants3. Innovation within the retirement space is exciting, however caution is warranted when making decisions that will impact plan participants. As fiduciaries, plan sponsors need to maintain their discipline and embrace a holistic, goals-based approach when they evaluate trending DC plan products, features, and solutions.
3. Offer Comprehensive Employee Financial Education Resources that includes a Financial Wellness Component
To recruit and retain top talent, plan sponsors must customize their financial education strategy and Financial Wellness initiatives to meet the needs of a diverse and evolving workforce. Different generations of workers engage with educational content in different ways: in-person meetings, videos, articles, or one-on-one sessions. What resonates with someone early in their career may not work for someone approaching retirement. As a result, plan sponsors must target, differentiate, and vary their education methods to engage all of their employees.
Last year, inflation and the threat of a looming recession were top of mind for many Americans. Three statistics from a recent PNC survey of corporations and their employees emphasize this4:
- Seven in ten employees reported feeling financial pressure that negatively impacted their work.
- Three of four employers reported that employees’ financial stress affected operations, leading to reduced productivity, lower morale, and decreased performance.
- Only one in four (23%) survey participants spoke with a financial adviser in the previous three years.
Plan sponsors can help employees with their financial well-being by making their retirement plans more than just a vehicle for saving. A nuanced emphasis on financial wellness can not only improve employee financial health but also foster greater productivity and talent retention. Providing access to group education sessions during the workday, encouraging the use of calculators and other online recordkeeper tools, and facilitating individual consultations with financial educators are all helpful steps.
4. Evaluate Cyber Security
As the number and sophistication of cyberattacks increases, organizations are educating themselves on how best to protect themselves against fraud. Plan sponsors and participants need to stay up to date on the DOL’s cyber security guidance. For plan sponsors, the DOL’s “Cybersecurity Program Best Practices”5 is a helpful starting point. The DOL guidance highlights plan data as a central concern. We recommend plan sponsors evaluate their internal best practices as well as those of recordkeepers and other plan vendors.
Plan sponsors should consider asking for an annual update on cybersecurity best practices from their providers. Reviewing and documenting this process is a prudent first step. Document actions taken internally to protect participant data and keep records and notes of the actions taken in the Plan’s Fiduciary File. Equally important is to remind employees of the importance of keeping financial accounts and personal information safe. This is a simple line of defense against cybercrime.
Plan sponsors serve a critical role in managing retirement programs in a way that helps create positive retirement outcomes for plan participants. As a fiduciary partner, Clearwater will be proactively helping our clients work through this checklist throughout the remainder of 2024 and beyond. If you are not yet a client of Clearwater, please feel free to reach out to our team to learn more about how we might be able to serve you.
1, 2, 3 – Plan Sponsor Council of America, 66th Annual Survey Report
4 – PNC, Financial Wellness in the Workplace Report 2023
5 – Department of Labor, Employee Benefits Security Administration, Cybersecurity Program Best Practices
Symposium Replay
Clearwater Capital Partners Spring Symposium series has now come to a close, and we wanted to ensure that you and your employees have the insights that were presented during these events.
Therefore, we are pleased to offer you access to our recorded presentations from our Symposium series.
This year’s presentation featured two topics:
- Perspectives on the Market, the Economy and Our Path Forward- Presented by John Chapman Chief Executive Officer and Chief Investment Strategist
- Cyber Security and the Evolving Risk Landscape- Presented by: Jeff DeHaan, CFP®- Chief Compliance Officer and Managing Partner of Private Wealth Practice
You can access the recorded presentations and gain insights into the important topics by clicking the button below.
Access to Recorded Presentation
We encourage you to take advantage of this opportunity to access the valuable insights shared during the Spring Strategy Symposium series. Should you have any questions or need further information, please reach out to your Clearwater Capital relationship.
Clearwater Capital Foundation – 2024 Charity Supercar Show
On Saturday, June 8th the Clearwater Capital Foundation will host the 4th annual Charity Supercar Show. Last year’s event drew almost 1000 attendees, 300 cars, and raised $60,000 for 3 local charities. Free, family-friendly and fun! Help us make a big impact!