PSNC 2015: CEO Roundtable

Plan sponsors face a host of challenges in an industry that is changing at lightning speed. Several of these were discussed at the PLANSPONSOR National Conference in Chicago, including new plan design features, a convergence of employee benefits, and the shift from asset -focused education toward holistic financial education, retirement income products and new technologies.

“Automation plays the key role in the savings rate and accumulations,” said Peter Gordon, CEO of John Hancock Retirement Plan Services. That strategy is the core of what needs to be done, he said. If you automatically enroll new participants and re-enroll older ones, you can impact 85% of the group as a whole. Other plan design features such as Roth conversions can motivate participation on a tax basis, he said.

Panelists also discussed the rapid evolution of the retirement industry and predicted the next practical applications that plan sponsors may use. For instance, Joe Ready, executive vice president of Wells Fargo Institutional Retirement and Trust said, “Even if participants do OK with their asset accumulation, they are not in good shape if they retire with a lot of debt.”

Ready noted that Wells Fargo takes a holistic approach with participants. The company urges plan sponsors to imagine participants as being in four very separate buckets. There are the early savers—auto-functionality works well for them. The mid-career participants are struggling with aging parents and college tuition. [In] the third bucket are near retirees who need help optimizing their savings. And the last bucket contains those living in retirement who need financial help managing longevity and investment risk.

“Think about what you offer participants, keeping in mind the four buckets. If you thought it was hard to get people into the initial plan, the next big challenge will be the near retirees and the products and services they need now,” he said.

Eric Wietsma, senior vice president, retirement services sales and worksite education for MassMutual Retirement Services, spoke about how retirement benefits are viewed in the overall benefits scheme. “Are we seeing a convergence of benefits? As you look at macro trends, employers will not be able to continue to pay for health benefits, and retirement plans are in the middle of this dilemma. We may not be far away from a time when employees receive a pot of money and they can sort out the benefits they need.”

Wietsma  emphasized the importance of financial wellness for participants. Employers must keep in mind that if employees work longer, the company may face real financial issues such as increased health care costs, disability claims and workers’ compensation.

To promote financial wellness, Gordon said, John Hancock teaches budgeting, which it calls the broader subject’s most popular model. The practice has led to healthier employees, with lower levels of stress, he said.

Ready concurred, calling budgeting the No. 1 wellness component. He also spoke about how “big data” affects plan sponsors and how Wells Fargo is on the cusp of using it to engage employees as they prefer to be engaged—whether  by phone, virtually, or face-to-face. Plan sponsors may look forward to communicating with participants via wearable devices and voice recognition programs, he said.

There are several retirement income products on the market, but, according to Wietsma, plan sponsors are hesitant to pull the trigger. “All products are leading us in the right direction.”

Instead, when time for retirement, many participants take lump sums and put them into an individual retirement account (IRA). Distributions are very complex. Ready envisions, in the near future, participants keeping assets in their employer plan. “Why leave if they’ve had their money in the plan for years and years, and many advisers won’t take clients with less than $150,000? Staying in the plan is a good option.”

Lastly, the panel discussed the implications of the recent recordkeeper consolidations. In this very competitive market, the consensus was that the consolidations can be completed without disruption to plans and that the remaining recordkeepers must up their game, making the industry stronger and better.