October 11, 2012 (PLANSPONSOR.com) – Portfolio Evaluations Inc. (PEI) launched a fiduciary protection program, PEI Shield, which aims to help retirement plan fiduciaries with evolving fiduciary regulations and requirements.
The program provides access to a group of experts to help develop a customized solution to meet a plan’s specific fiduciary requirements. Programs are built around plan, investment and service provider management elements and are based on plan variables such as plan investment structure and operational design. Users can incorporate existing practices into the program and add applicable program elements. It also offers continuous education, informing fiduciaries of the latest requirements.
The teams of experts include the Retirement Plans Consulting group, Investment Due Diligence group, Investment Consulting group and Client Services group.
Features of the program include fiduciary process management, such as education and regulatory updates; fiduciary plan services, including investment policy statement (IPS) development and plan fee benchmarking; fiduciary investment due diligence, such as target-date fund glide path methodology review and performance evaluation and monitoring; and fiduciary oversight of provider services, ranging from service provider due diligence to custodian searches.
The program was founded by Michael Sasso, Attila Toth and Rich Torbinski.
October 11, 2012 (PLANSPONSOR.com) – Bank of America Merrill Lynch
(BofA) makes the case for automatic enrollment, automatic escalation, company
matches, education and advice, plus regular plan and participant checkups.
Until recently, many 401(k)
sponsors have been disconnected from their plans, BofA said in a new white
paper titled “Success by Plan Design.” Plans designed to spur action and engage
participants, on the other hand, have higher participation and contribution
rates, better outcomes, and more loyal and dedicated employees, BofA said.
“We believe that privately
sponsored corporate retirement systems, particularly 401(k) plans, are
successful—and can be even more so by creating a path for employees, starting
with auto-enroll,” Kevin Crain, head of institutional and benefit services at Bank
of America Merrill Lynch, told PLANADVISER.
“Twenty-five percent of employees who are auto-enrolled become more engaged in
their plans. More providers are adding in advice, giving participants a real
incentive to become actively engaged. With the greater employee engagement we
are seeing, and with plan and service enhancements, we can help make 401(k)
plans even more vibrant.”
Advisers can equip sponsors with
comprehensive, yet simply designed solutions to help them take action and
motivate even young and difficult demographics, such as low-wage earners or
older employees with low balances, to take advantage of their 401(k) plan by
showing them the increasing power of compounding or the benefits of catch-up
provisions, BofA said. Retirement readiness is not as elusive a goal as many sponsors
and participants fear, BofA said. “We believe that long-term financial security
is easier to achieve than many think,” the white paper said.
“It is paramount that these
plans work,” Crain said, noting great
improvements that have been made to 401(k) plans since their inception, including
automatic enrollment and target-date funds. In
the next decade, Crain foresees “even more advanced plan designs that will
automatically guide participants into retirement income mode.”
An action-based plan starts with
automatic enrollment and a contribution rate of at least 6% that gradually,
through annual increases, escalates up to 18% or more, BofA suggested. An
action-oriented plan would also extend automatic enrollment and increases to
all employees, not just new hires, offering it each year by combining annual
health care and 401(k) annual enrollment. Employers’ standard 3% matches could
be redesigned with an eye to boost contribution rates, replacing the 100% match
of the first 3% of contributions with a 50% match on the first 6%, for example,
or 25% match on the first 12% of contributions, BofA said. Additionally, the
plan sponsor might consider increasing the maximum contribution participants
can make to the permissible $17,000 a
year allowed by the Department of Labor for those under the age of 50 and to $22,500 a
year for those who are older, BofA said.
“Associating overall health and financial wellness creates a
sense of urgency on the part of employees to engage in their plan,” BofA said. “When sponsors make it easier for employees to enroll in the plan
and raise their contribution rates, employees are more likely to take
action. Proof is in the numbers. In 2001, 90% of participants in Bank of
America Merrill Lynch plans took positive action by either enrolling or
increasing their contributions when health care and 401(k) events were
connected.”
BofA data shows that 25% of plans with automatic enrollment
have higher average participation rates, and that 43% have higher
participation rates among younger employees. Plus, 97% of employees who
are automatically enrollment do not opt out—even with a higher default
rate of 6%.
Additionally, nearly one-quarter (23%) of the plans that BofA administers added the automatic increase feature in the past year.
Education and individualized advice should also be an integral
part of a retirement plan, BofA said. Bank of America Merrill Lynch’s
2012 Workplace Benefits Report found that 79% of employers anticipate
greater employee demand for investment advice in their plans. Sprectrem research
also found that 75% of plan sponsors would offer voluntary planning and
advisory workshops, and that 70% of participants would take advantage
of company-sponsored personal finance and investment services. BofA
suggested that this advice go beyond retirement to cover “budgeting, home
ownership, insurance, health care, college planning, estate planning,
eldercare and offerings tailored to the unique needs of women.”
As to sponsors’ concerns about the cost of providing a
retirement plan or providing a company match, BofA reminds employers
that matching a modest salary does not put an undue hit on the bottom
line, plus, company matches are tax-deductible for sponsors.
“Advisers are longing to show sponsors value,” Crain says. “Retirement
plan advisers have the tools available today to advance the designs of
401(k) plans and their uses, to improve the health and vibrancy of the
401(k) plans they serve. When this works, employees know they have been
helped, and the adviser has an opportunity to establish a long-term
relationship. We feel very strongly that the 401(k) system has been
successful and can be even more successful. The way to do that is
obvious. The solutions are easy and not costly. I definitely have a
great sense of optimism for 401(k)s in the next decade ahead.”