Wondering where plan sponsors will be focusing their interest and efforts in 2019? We turned over a few stones and found some ideas. Here are a few of them:
Getting those holdouts into the plan
The low-hanging fruit, aka employees with a lot of interest in their future and the ability to save, joined the 401(k) plan right away. The next wave took some persuasion, in the form of applying the principles of behavioral economics including auto-enrollment. But now, what to do with employees whose financial situation has rendered them unable to visualize themselves ever retiring — let alone saving to pay for it? A recent article says financial wellness strategies, like budget and debt management, may help them. This is where many plan sponsors will be focusing this year.
Bringing back the lost sheep
2018 saw lots of plan sponsors focused on missing participants, and 2019 promises to see more of the same. If your plan has missing participants, now is a great time to get cracking on finding them, because attention from the Department of Labor seems to be increasing.
Increased Focus on Non-Savers
As it becomes increasingly difficult to “move the needle” with regards to voluntary participation rates (and opt-out rates in auto-enrollment plans), plan sponsors will look to move past traditional communication with non-participating employees and attempt to engage them by addressing the root causes of their failure to save. By providing student loan assistance, debt management support, budgeting assistance, and other financial wellness services, plan sponsors can help address the affordability issue of retirement plan savings.
Locating “Missing” Participants
This was a significant trend in 2018 and will continue to be a hot topic in 2019 as well. Due to the recent Department of Labor (DOL) crackdown in this area, participants with bad addresses will be high on the radar screens of plan sponsors. And, thanks to the magic of the Internet, we predict that many “missing” participants will be located in 2019 (perhaps so many that this will no longer be a major issue).
The Reemergence of MEPs
Multiple-Employer Plans (MEPs) allow multiple employers, typically in a similar industry, to participate in a common retirement plan, sharing a core plan administrator or lead employer. MEPs returned to the radar screen courtesy of an executive order from the President. Even entities previously not associated with MEPs, such as a group of private colleges, joined the MEPs club in 2018. With the potential for some legislative clarity on the horizon, look for a potential surge in MEPs in 2019.
Focus on Recordkeeper Value vs. Cost
The majority of plan sponsors have “been there and done that” with respect to plan fees; therefore, we predict that the focus in 2019 will shift from recordkeeper cost to value. Plan sponsors should consider whether their recordkeeper is providing measurable “bang for the buck” by increasing variables such as plan assets, median account balances, voluntary participation rates (particularly among younger employees, where savings is critical), and retirement readiness.
Re-acquaintance with Hardship Distributions
Until recently, hardship distributions were often a forgotten retirement plan transaction, since the rules in place made them a relatively rare event. All of that has changed with the arrival of the proposed hardship distribution regulations, which are expected to be finalized in 2019. Plan sponsors will need to reacquaint themselves with this often administratively burdensome transaction in order to decide whether they wish to increase the number of hardship distributions in their plan, stay the course (with possible employee relations consequences), or eliminate hardship distributions entirely.