Opinions October 15, 2018

What If You Could Exit the 401(k) Business?

There is a modern, professionally managed and outsourced alternative that, while not completely relieving plan sponsors of their fiduciary responsibilities in the eyes of regulators, removes pressure on company resources.
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Many small and midsize companies face increasing pressure on resources as a result of a complex regulatory climate, concerns about fees, and greater expectations to deliver competitive retirement and financial wellness benefits to their employees.

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But it comes as no surprise to most business leaders that the significant compliance requirements, costs, investment knowledge and administrative rules required to establish and run a retirement plan can very quickly look like managing a non-core, ancillary business. Fortunately, there is a modern, professionally managed and outsourced alternative that, while not completely relieving plan sponsors of their fiduciary responsibilities in the eyes of regulators, removes many of these distractions.

Outsourcing the plan can enhance plan sponsors’ commitment to their workers

Employees are the single most important asset for most companies. So why would management teams want to abdicate oversight of their company-sponsored retirement plan—one of the most valued ways to attract and retain high-quality workers—to a third party?

We think the answer lies, in part, in how different segments of a company’s workforce weigh their benefit priorities. While most workers at all ages rate their base pay as their top priority, younger workers tend to value career opportunities over their retirement plan. Mid-career professionals who are forming families tend to value health care benefits and incentive pay right below their base compensation and retirement benefits; career opportunities are less important to this group (see Figure 1).













Top management might consider what their human resources (HR) team could do to improve the organization’s overall benefits posture if it no longer had to devote time to understanding the investment, compliance and administrative aspects of the managing the company 401(k)!

Delegation of investment and administrative responsibilities may lower cost and improve outcomes

A common goal of any outsourced solution is to lessen an employer’s fiduciary risk and reduce costs. Some currently available mid-market solutions remove the investment and administrative cares and burdens of managing a plan. They not only offload the investment and operational headaches involved, but also can lead to lower costs and improved outcomes for participants. A delegated solution may be appropriate for companies that want to focus more on defining and executing on business strategy and less on managing the intricacies of a qualified retirement plan.

  • Strategy development. Delegation allows employers to define plan objectives and desirable design features while also retaining the ability to align the plan with longer-term corporate goals and strategy.
  • Investments. Companies may lessen the bulk of their fiduciary responsibility and legal liability for making investment decisions by engaging a 3(38) investment fiduciary under the Employee Retirement Income Security Act (ERISA). Through this delegated approach, the provider assumes responsibility for manager selection and termination, contract and fee negotiation, performance monitoring, and compliance oversight. Better yet, the growing use of collective investment trusts (CITs) allows plan sponsors and their participants to potentially benefit from dramatically lower fees from institutionally priced multi-manager funds appropriately matched to their unique employee demographic.
  • Plan administration and compliance. From performing Form 5500 filings and testing, to recordkeeper management and oversight, a delegated solution provider can serve as an employer’s ERISA 3(16) plan administrator to alleviate staff time-sink associated with handling onerous back-office details such as determining employees’ eligibility to join the plan and mastering the rules for managing contributions to and distributions from the plan.

 

A more comprehensive financial wellness solution should include 1-to-1 engagement

Plan sponsors recognize that, just as a retirement plan is only one component of an individual’s overall financial well-being, it must meet participants’ benefits needs on their terms. Many providers now offer access to a variety of wealth and health platforms through a mobile app, which research shows is the fastest growing way for employees to get information. With a mobile-first, immersive and unified user experience, participants will automatically have access to educational tools to help them get and stay healthy as well as manage their finances.

For many reasons, a company-sponsored retirement plan remains a valued benefit for employers who want to attract, inspire and retain the very best employees. Offering a 401(k) plan, however, does not mean that an employer needs to be in the 401(k) business. By using a professionally managed, fully delegated retirement-plan solution, company leaders can get back to the critical task of growing their primary business.


 

Liana Magner, CFA, is the US defined contribution and financial wellness leader for Mercer Investments.

 

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Strategic Insight or its affiliates.
Reader Responses October 15, 2018

SURVEY SAYS: Listening to Music at Work

We covered a survey in which the majority of respondents said they like listening to music at work and it makes them more productive.

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Last week, I asked NewsDash readers, “Do you listen to music and work and how do you think it affects your productivity?”

 

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The majority of responding readers (96.3%) said their employer allows them to listen to music while working, and the rest said they do not know.

 

More than half (57.4%) indicated they listen to music while working, and 42.6% do not. More than one-third (35.2%) said music does or would make them more productive, 27.8% said it does or would make them less productive, and 37% reported it doesn’t or wouldn’t affect their productivity either way.

 

Responses left by those who chose to leave comments were about evenly mixed between those who feel listening to music is distracting and those who feel it is helpful. However, the majority of those who spoke of listening to music said it was to drown out other noise that was distracting. Editor’s Choice goes to the reader who said: “You can’t fully concentrate on two things at once. If you’re working, you’re not really listening to the music; and if you’re listening to the music, you’re not really working.”

 

Thank you to all who participated in the survey!

 

Verbatim

  • I think most people who “listen” to music while working are actually using the music to mask other noises that could distract them. You can’t fully concentrate on two things at once. If you’re working, you’re not really listening to the music; and if you’re listening to the music, you’re not really working.
  • I need the music to drown out all the complainers I work with!
  • I am completely incapable of maintaining a professional task, conversation or discussion while music (or the TV or computer live streaming) is playing. Maybe it was the way I was raised and the habits I developed early in life, but I have always work best with silence!
  • I wish I could set up my office so all the sound stays in my office and not spill out into the hall
  • We’ve moved to the much hated “open work environment.” I only listen to music if there are loud conversations around me that I’m not able to tune out. In general I find any sound, including music, to be distracting. I much prefer quiet. I also hate wearing headphones and earbuds. Guess I’m high maintenance.
  • The only song I want to hear is “Sounds of Silence” – no phone, no meetings, no noise!
  • It annoys me to listen to music with words while trying to focus on something else. Maybe I should try meditation music. That might help.
  • Not everyone can concentrate with music playing, so the people who say they have to have music playing need to wear headphones so the rest of us aren’t distracted and unproductive!
  • I don’t mind low instrumental music in the background, but prefer to work in complete silence. Voices/conversation are particularly distracting. I hate the open office concept, but luckily am at a level where I have a private office.
  • How can someone listed to music and do complex calculations at the same time? We had one person in our office who wore earbuds all day, every day. Every time you went to talk to her, she would have to take them out. Or you would have to call her several times to get her attention. Very unprofessional.
  • Breaks up the monotony a little bit. And my co-workers must think so too because they’ve asked me to turn up the volume on my radio.
  • I usually listen to podcasts rather than music.
  • In my open office environment, some people have loud voices that carry across the entire floor. Wearing noise-canceling headphones is a necessity.
  • The music clears my mind of all the social distractions of the office, allowing me to focus better and think more creatively. Perhaps it’s the influence of the Beatles, my go-to group to listen to.
  • Listening to music at work makes me more productive. I am more focused and, therefore, more productive.
  • I work in a cube, and the only time I listen to music at work is when I’m trying to drown out very loud and annoying conversations by certain individuals.
  • The only time I listen to music at work is during the holiday season. This is one of my busiest times and it is nice to experience some of the festivities, so I bring in Christmas CD’s and play them in the common area between all our offices where we can all hear it, but it isn’t too distracting to anyone, by being in an individual office.
  • I work from home. It’s too quiet without the radio on.
  • Essentially it is background noise that helps eliminate all of the other possible distractions.
  • I hate earbuds and headphones (and, for that matter, hats!), so listening to music in that manner is not appealing. When I work from home, I do tend to have the TV on to provide background noise, since the dog only knows one “tune”!
  • I believe that it lowers my stress levels.
  • I find it too distracting.
  • It’s my version of white noise and helps block out loud conversations in the office.
  • It’s a great way to drone out the normal hum-drum of office life while also a very sly way to drone out that annoying co-worker and their weird noise habits! 🙂
  • I crave quiet time to work. I do not think it is professional to have music on in the background when 80% of the time I’m on conference calls with clients or other partners. The remaining time, I am reading or formulating solutions (not “solutioning”) and need to concentrate. Working from home, it’s hard enough with the dogs barking, doorbell & home phone ringing, and retired husband watching TV all day in other parts of the house.
  • Some days you just want or need to focus on a project. I work in an open office work space so headphones are the equivalent of “do not disturb”.
  • Actually, it helps me focus on what I am doing with my work and do not have to listen to nearby others conversations. I love the concept.
  • I do not listen to music at work. If it was music I liked, I would sing along. If it is music I don’t like, I would be less productive (because I would be annoyed). I concentrate better in silence than with noise.
  • I worked in the corporate office of a retailer several year ago and they had a sound/speaker system that played music throughout the building. I found it distracting at first but then I grew to love it.
  • I love music, and when I tried listening to music while working I ended up focusing on the music and not on work. I suppose it would be great if you wanted to avoid work.
  • When it is something I have done often, music keeps me on task.
  • I use music to calm me during hectic times and boost my output during busy times. The type of music makes a huge difference to me and my output.
  • Working in a noisy, open cubicle environment, I listen to music to both drown out the background office noise and motivate me. Listening to a great song can be invigorating!
  • I find it distracting and always have. And then there’s the arguments about type of music, loudness, etc. Being in HR, I am not fond of the subject at all. And ear buds! I just love walking up to someone and they can’t hear me speak to them because they have ear buds in the ears – not! On the other hand, I can understand why people would want to shut out the world and how it could make them more productive so in the end, I am glad we have a choice here.
  • I find it ironic in a time when people (generally people who have offices) remain enthralled about open, “collaborative” workspaces, a growing number of folks who have to work in those areas are donning headphones (and probably listening to music) to drown out the “din.”

 

 

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.

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