Compliance concerns, lengthy wait times, incorrect information. These are only the more recognized complications when assessing call centers, so how can plan sponsors and providers offer dependable—and reliable—material to participants?
Recent analysis of responses to the 2017 PLANSPONSOR Defined Contribution (DC) Survey found that sponsors are more satisfied with call center services than other participant services, yet respondents were also more likely to cite them as an area needing improvement than as a top service offering, with sponsors reporting slow response times, inaccuracies and poor service as common complaints.
The apparent contradiction was not surprising to Brian O’Keefe, PLANSPONSOR’s director of research and surveys, noting “in the internet-age, call centers may seem antiquated, but sponsors are not shy about voicing dissatisfaction if one fails to resolve participant questions.”
To understand what callers face, Lauren Brouhard, executive vice president at Fidelity Investments, suggests participant surveys—by phone or otherwise—and let the responses determine improvements the sponsors should make.
O’Keefe concurs. “Sponsors need to understand and assess participant needs and know that the provider can meet any unique needs,” such as serving employees in several time zones.
O’Keefe says small plans often have a small, central participant pool which is easier to service (i.e., you can offer seminars or one-on-one meetings onsite during work hours or direct participants to a local adviser, whom they can meet with whenever is convenient). However, larger plans lose this option because workforces get more distributed and spread across time zones.
“In terms of call centers, I presume it is expensive to staff a call center after hours and on weekends because you have to plan for a certain level of call volume that may or may not materialize. Additionally, you may need to staff multiple locations to account for potential business interruption from weather or other unforeseen circumstances. If you have a small plan, those costs cannot be shared across a larger participant base, but with larger plans you can do that,” he says. “Smaller plans may prioritize ‘high touch’ service that offers a depth and quality of conversation (likely in person) over accessibility that extended hours may provide.”
Avoiding fiduciary risk and providing correct information
Providing correct information while not overstepping the boundaries of giving advice is also something to consider for a call center. To avoid litigation, it’s clear why some plan sponsors or providers would rather generalize information to participants.
“One thing call centers have really felt pressure on, is how much do we try to integrate ourselves in this engagement process, to help people make more appropriate decisions meet their needs, and how much do we not want to be involved in that because it opens panels to potential fiduciary risk?” O’Keefe notes.
So, how can plan sponsors and providers oversee a representatives’ compliance, while also delivering thorough information?
Well, by literally doing so. According to Brouhard, if a provider offers the service, plan sponsors may be permitted to evaluate calls between representatives and participants, to confirm no fiduciary risks were made.
“Some plan administrators request the option to review calls as well—we do have some clients that are partnering with us to ensure compliance by reviewing calls themselves,” she says.
Additionally, Brouhard recommends the use of strong technology to safeguard correct, and valuable, information. Employing sounder equipment can create clearer data for both the call center associate and participant, while mitigating compliance issues. At Fidelity, an associate desktop is configured to display a plans’ advice or education, to ensure sharper communication.
“It’s really important to keep the environment for the associates simple and straightforward,” she says. “Make sure there’s the right content and process for quick and easy access, so that there is no doubt in their mind what they’re supposed to do.”
While dissatisfactions are unescapable, O’Keefe and Brouhard say the number one key to ensuring consistent and correct information is having a working partnership between the plan sponsor and provider. Brouhard says, “It’s really a partnership to get information out and make sure participants can engage in a way that works for them, to help them enhance their financial wellness and meet their needs.”
O’Keefe is confident that providers are investing in technologies to improve quality while reducing cost and is quick to point out that future of call centers may look very different.
“Twenty years ago, call centers dominated participant interactions,” he observes. “Today, websites, and increasingly mobile apps, have taken center stage. But continued acceptance of online chat support and advancement in artificial intelligence may transform the participant experience and render the traditional rep-based call center obsolete.”
In the meanwhile, sponsors should invest the time to confirm that their plan’s call center strategy meets their participant’s needs.
Retirement Program Designs of the Future: Beyond Automatic Plan Features
As retirement plan sponsors focus on increasing retirement income replacement ratios for participants and new generations enter the workforce, they need to look at enhancing their retirement programs so participant retirement goals are met.
As it became clear that defined contribution (DC) plan participants were struggling with savings and investing decisions, the use of automatic plan features, encouraged by the Pension Protection Act (PPA), became the new trend in helping participants reach their retirement goals.
The 2017 PLANSPOSOR DC survey found that 42.7% of DC plans overall use automatic enrollment, and 35.4% use automatic deferral escalation. This increases to 65.6% and 67.3%, respectively, for the largest plans. In addition, many DC plans are defaulting participants into target-date funds (TDFs) as a set-it-and-forget-it investment strategy—letting professional managers take control of investment diversification decisions.
However, as retirement plan sponsors focus on increasing retirement income replacement ratios for participants and new generations enter the workforce, they need to look at enhancing their retirement programs so participant retirement goals are met.
“’Set-it-and-forget-it’ might be the approach that many participants prefer to take when it comes to their retirement plan account, but for employers such an approach can be extremely limiting—or even detrimental. As with most components of a successful business, staying up-to-date on new developments as a means of remaining competitive can make a huge difference,” says Chuck Coldwell, vice president – national director, consulting and BOLI Services at Pentegra, who is based in Katonah, New York.
Coldwell believes as an industry, we still have not reached the goal of getting the majority of participants in a good place for retirement—even with auto enroll and escalate, there is a long way to go to get the majority of participants into these types of plan design. “DC plans are not first on people’s minds. Getting them to save what they need to is still a huge challenge. Automated features will help without a doubt to build better account balances, but employees still have responsibilities for decisions about how much to save and how to invest,” he says.
Joel Lieb, director of SEI Defined Contribution Advisory in Oaks, Pennsylvania, adds that meeting the needs of younger and new generation participants is especially important. “The simple truth of the matter is that younger folks do not have the same set of resources as older employees, who have generated real and sustainable retirement income through pension plans. Younger workers, we all know, are having to rely almost exclusively on defined contribution plans, and that will be the case moving forward,” he says. “I mention this well-known background because today we are stepping back and asking, what can we do to help plan sponsors make their defined contribution plans just as effective at creating retirement wealth as have been DB [defined benefit] plans? How can we help employees get into a position where they can retire when they want to, and not be forced into the situation of trying to work past the traditional retirement age, because of poor planning?”
Targeted communications and financial wellness
Coldwell says he is a firm believer in education. “Education has to be more than in-person because that can’t happen as frequently as needed. We push out education rather than waiting for participants to seek it. There is still a challenge of making sure they read it, but I still think it is the best method, and it has to be consistent.
An Insights article from Sibson Consulting states that, “A pivotal factor in helping employees improve their retirement readiness is opening the channels of communication and customizing the messages. To have a meaningful impact, plan-related communication must be actionable and personalized. Except in rare instances, one-size-fits-all is a misnomer; it should be one-size-fits-few. Communication should also be easy to understand and delivered on a regular basis, beginning well before retirement age. Further, the impact of the communication must be measurable, so the results can be monitored.”
Doron Scharf, senior vice president with Sibson Consulting in New York City, says one of things Sibson does is a survey to find out what drives behaviors of participants. This helps with targeted communications. Jonathan Price, Sibson Consulting vice president and consultant in New York City, adds that communications should be provided about the retirement plan, but capturing participant behaviors and intentions—understanding them—will apply to not only retirement plan communications, but overall financial wellness education.
For younger workers, one way to make these conversation more concrete is to use the framework of “Health, Education and Retirement,” says Lieb—a concept explored in an SEI paper, “The Next Generation of Retirement Plan Participants.” Lieb adds, “We know that younger employees, as they get their foot in the door, they face significant student debt burdens and they have to make decisions about starting a family and other challenging topics. We think that DC plan sponsors are in a great position to help these people, especially as we see technology improve and it becomes easier to link all the necessary infrastructure that will help folks both see and manage their holistic financial picture.”
Robb Muse, senior vice president of SEI Trust Company in Oaks, Pennsylvania, says, “One of the chief challenges that we face today as providers and sponsors is that we don’t exactly have a complete picture of individual plan participants. Where the industry is moving, slowly but surely, is towards finding a way to put together a solution that offers a holistic view of the participant lifecycle. Having this visibility will help us better understand how participants evolve, from the time they start with the company to the time they retire. Early on in the savings journey, for example, we know it is more important to look at the debt and other financial burdens the employee is carrying, and analyzing how these factors impact decisions in terms of investing in the plan. As we build a more holistic view of the employee, as the employee ages and the needs evolve, the plan sponsor can help them shift priorities. That’s the kind of evolution we are trying to push forward—building a full picture of what individuals’ life needs are and how we can address them going forward.”
Scharf says employers should convey that the retirement plan is only part of the broad financial wellness of participants. Remind them how important retirement savings is, but address other needs.
Coldwell says tools are also important for educating retirement plan participants. Employers should provide tools for employees, such as calculators, differentiators between Roth and pre-tax (he says the average participant doesn’t understand the benefits of Roth deferrals) and investment concepts. He notes that the Advice Plus software program from Pentegra tells people if they are falling short of retirement goals; they may have to save more but may have to reinvest. And, it actually tells participants what funds to use in their portfolios.
Plan design changes
Sharf says one step beyond automatic enrollment and automatic escalation is automatic re-enrollment. Facing the behavioral concept of participant inertia, making employees choose to opt-out every year increases the opportunity to engage them. In addition to helping employees save at the default deferral rate, re-enrollment can help participants with investment decisions, as they are re-enrolled periodically into a default investment strategy such as TDFs, Coldwell adds.
Robb Muse, senior vice president of SEI Trust Company in Oaks, Pennsylvania, says he pulled data from two plans in which the firm has had great success getting people into the qualified default investment alternatives (QDIAs), and in both of those plans less than 5% of participants did any type of trading in response to recent market drops. “In fact in the one plan, which has something like 80% usage of TDFs, that plan population had less than 1% of active participants do any trading during the month. Another plan that has about 50% of assets in TDFs; they saw less than 4% of participants make trades during February. Looking at those in TDFs solely, the figure drops to 2%,” he notes.
Sibson also suggests DC plan sponsors stretch their match formulas. Jonathan Price, Sibson Consulting vice president and consultant in New York City, suggests that if a plan auto enrolls participants at 6% and matches 100% of 6%, but auto escalates participants to 10%, the plan sponsor may consider stretching the match to 60% of 10% of deferrals to incentivize employees to stay with auto escalation. Doran notes that this does not cost plan sponsors anything additional.
However, Price warns that when considering implementing a stretch match, plan sponsors should consider examining whether a portion of the participant population feels they cannot afford to increase deferrals. In this case, stretching the match could be disenfranchising to employees and could have unintended consequences.
Sibson also suggests DC plan sponsors should consider participants transition from accumulating account balances to generating income. According to the Insights paper, “Offering income options (e.g., lifetime annuities, qualifying longevity annuity contracts (QLACs)), either within or outside of the organization’s retirement plan, can help employees feel comfortable that they will be able to retire when they want.”
In addition to stretching the match and re-enrollment, Pentegra suggests allowing rollovers in plans and ending automatic cash-outs. “Why leave money in a 401(k) account from a previous job—or withdraw it and deal with penalties and taxes—when you can just add it to your current retirement savings vehicle?” Coldwell queries.
He adds that instead of automatic cash-outs, plan sponsors should use automatic rollovers. “Cashed out money is likely to spent on something other than retirement,” Coldwell says. “I understand the need to clean up records and decrease costs, but rather than give money to participants, set up an IRA for them, and in communications, when someone terminates employment, remind them they still have a balance and can possibly roll it over into a new plan or IRA.”
Simplify investments
Muse says helping participants with streamlining and simplifying their investment menus is important, and a big part of this is ensuring investors are routed into age-appropriate and well-diversified QDIAs. However, many participants favor the ability to take a hands-on approach to investing. But, according to SEI’s article, “What these individuals prefer to do without is the research and due diligence of the [many] investment options available on their plan’s menu.”
Muse says helping these individuals build a custom investment portfolio generally involves going down the white label route and exploring the use of collective investment trusts (CITs). He explains that CITs are attractive investment vehicles to use within retirement plans for a variety of reasons. In addition to the cost and pricing benefits associated with CITs, the customized packaging capabilities allow for smoother administration of plan investment lineups, participant communication and plan-specific branding. Likewise, the construction of portfolios as CITs permits the inclusion of smaller, niche managers who may not offer a mutual fund product lineup, which can be especially beneficial in emerging areas, such as environmental, social and governance (ESG) and other socially responsible investments.
SEI explains that white-labeled investments are funds that include several different fund managers within a certain investment strategy. For example, participants can be presented with one Multi-Manager U.S. Large Cap Equity Fund, but it consists of five different types of large-cap equity funds—simplifying the large-cap fund choice for DC plan participants.
Muse says a further spin on this method of menu creation is to take a goals-based approach, where rather than presenting participants with investment options labeled as broad asset classes, goals such as growth, income and stability are highlighted. “Though this type of plan menu design strategy hasn’t gained traction yet in the marketplace, the potential benefits in terms of participant engagement and outcomes are significant,” he says.
“Plan sponsors must understand that they still have a responsibility to their work force to help them plan for retirement in a realistic way,” Lieb concludes.