What Keeps Plan Sponsors Up at Night?

Posted on Oct 3, 2019

Plan sponsors have a lot on their plates. At the 2019 National Association of Plan Advisors (NAPA) Summit, a panel of plan sponsors expressed their chief concerns, from participation rates to compliance. Following is a summary of the top 9 issues:

• Administrative burdens and complexity: It’s no surprise that compliance with complex, ever-changing government regulations is a top concern of plan sponsors. While plan sponsors often rely on recordkeepers, third-party administrators or other advisors to manage their plans and stay in compliance with the law, plan sponsors still have certain fiduciary responsibilities.
• Financial wellness: A recent survey conducted by the Federal Reserve Board showed that 40% of Americans faced with an unexpected expense of $400 would not be able to cover it. Many employers offer financial wellness seminars to help employees budget and improve their financial literacy.
• Savings/deferral rates: Many people underestimate what their expenses will be in retirement and run the risk of outliving their savings. Most alarming, almost half of older Americans have no money saved in retirement accounts, according to the U.S. Government Accountability Office.
• Participation rates: A retirement plan is one of the most beneficial tools an employer can offer to help employees secure their financial future. Shortened waiting periods, automatic enrollment, matching contributions, and financial education can spark employee interest and keep them motivated to participate.
• Plan administration costs: Plan sponsors need to be well-informed of recordkeeping and other plan administration costs and keep them under control.
• Investment fees: Investment fees can erode gains and can take a significant toll over time on an investor’s portfolio. Plan sponsors need to be aware of fees and the pros and cons of investment products and services.
• Cybersecurity: Fraudulent activity with regard to 401(k) accounts and pension plans is on the rise nationally, and safeguarding accounts requires efforts on both the employer and employee. Unauthorized distributions, loans, and transfers not only can wipe out employees’ life savings, but expose plan sponsors, administrators and their service providers to state and federal fines, lawsuits, and damage to the company’s reputation.
• Helping older workers plan for decumulation:  Will employees approaching retirement have enough income to support their lifestyle? Many people nearing retirement are unclear as to how they’ll manage their assets and make their savings last. It can be challenging to help older workers prepare for the future.
• Student loan debt: The majority of adults carrying student loan debt report that the debt seriously impacts their ability to save for retirement.[1] Moreover, a significant number of parents and grandparents have also sacrificed saving for their own retirement to help children and grandchildren pay off student loans.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.