Benefits February 18, 2022

Plan Progress Webinar: How to Increase Employees’ Financial Wellness

Robust financial wellness programming can distinguish an employer, serve as a retention tool, provide a competitive edge, and lower labor costs by bolstering employees’ retirement readiness.

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Plan sponsors gain several benefits that enrich both the employer and employees by offering financial wellness programs to workers, according to industry experts.

Financial wellness programs can sharpen an employer’s competitive edge, boost employee retention and recruiting, help reduce labor costs and increase worker productivity, panelists explained at a PLANSPONSOR Plan Progress webinar, “How to Increase Employees’ Financial Wellness.”

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Russell DuBose, vice president of human resources at Phifer Inc., said the benefit to employers is clear, particularly following the labor market and employment upheavals that have resulted from the Great Resignation and ongoing COVID-19 pandemic. His company has experienced these shifts and the resulting impacts to recruiting and the cost of retraining workers, DuBose explained during the webinar.

“Financial wellness as a focus is a fraction of the cost of having to hire and train new people,” he said. “When you look at it from an HR and budgeting point of view, it is a very low-cost line item from a dollar perspective.”

DuBose added that for the energy and effort, the benefit “is so exponential, [and] it is so powerful.”

Previous research shows that demand among employees for financial wellness resources has increased. This presents a window for plan sponsors to work with participants to bolster their retirement readiness with additional tools and support.

Beyond the potential for greater employee loyalty, providing holistic financial wellness programming is likely to spill over to bolster employees’ overall financial confidence and can affect employees’ retirement readiness by helping workers to retire when they want, said Kelli Send, co-founder and senior vice president for participant services at Francis Investment Counsel, an institutional retirement plan investment consultant.

Retirement resources and holistic financial wellness tools help prepare workers to retire on time, she explained.

“A financially well-prepared individual that understands Medicare and Social Security tends to retire on time, which then actually can lower labor costs because the retired folks tend to be the ones that are higher paid,” Send said. “[It] continues to grease that wheel through the age process as employees go through their career life cycle.”

One retirement-specific area where plan sponsors can beef up financial wellness programming is decumulation resources for near-retirees and retirees, she noted.

“The 401(k) industry has responded to this lack of engagement and lack of information knowledge with all these wonderful auto-programs—auto-investing, auto-increases, etc.—and all that is absolutely amazing but at the core of it, people still just don’t know what to do with their money,” Send said.

Pam Hess, vice president of research and membership engagement at the Defined Contribution Institutional Investment Association, added that wellness programming can highlight the financial struggles employees experience, particularly for low- and moderate-income workers. This cohort has heightened financial stress and anxiety, she explained.  

“We know that emotional toll that financial stress brings is absolutely tied to [employees’] performance at work, and if those lines become much more blurred, benefit programs can have a really large and positive impact on employee financial well-being, which is a win-win,” Hess said.

The panelists said plan sponsors that are building a financial wellness program must pay close attention to what’s included in the wellness information, as well as costs, delivery methods and how to determine what’s best for their employees.

Send noted that plan sponsors might have money set aside in an Employee Retirement Income Security Act budget, which can be tapped to cover financial wellness programming. “It is an approved ERISA expense,” she explained.

DuBose said that when his company was looking for financial wellness providers, the top attributes for Phifer were that providers must be able to provide broad and deep resources to address the distinct needs of disparate workers.

“I have 17-year-olds to 80-year-olds and they demand different techniques and different ways to communicate,” DuBose said. “Some absolutely love an app; others don’t have apps because they have not yet made the decision to go to smartphones. We have a large variety [and] we try to meet everyone in the middle and provide different avenues to information.”

Hess added, “There need to be different methods to reach [employees]. They need to be very flexible in terms of timing when they’re offered, how often, and we have to keep reminding [employees] that they’re available because they might not be listening today, but in two weeks you might have their attention.”

The panelists agreed that the programming costs must be transparent—explaining whether the employee or employer pays, or if the two groups split the cost—and that resources should be customized in an appropriate way for each specific workforce.

One important aspect of instituting a financial wellness program is ensuring that service is available to employees “on the clock,” during working hours, Send said.

“If you expect people to do this at night or on the weekends, they’re not going to do so,” she said.

Additionally, when selecting a provider, plan sponsors need to ensure that the vendor has metrics to quantify engagement and employee progress, so they can justify the expenditure to the chief financial officer and have it in a budget, Send noted.  

Ultimately, the greatest attributes for a plan sponsor are that the wellness provider is committed to helping a firm’s employees, that it understands the company’s culture and that it can relate to the employees, DuBose said.

“First thing we do is tell those folks ‘Get those ties off your neck and relax and let’s have a conversation,’” Dubose explained. “This is the Deep South and we build relationships first. For us, the most important part of any provider or vendor is ‘Do they understand our culture and can they massage the way they do business to support our culture?’ Once they figure that out, they go forth and do great things—that’s how we approach our vendor selection.”

Compliance February 18, 2022

Recordkeeping Fee Suit Questions Revenue Sharing Arrangement

In addition to naming the company as a defendant, the lawsuit also targets members of the board of directors, as well as other officers of the firm.

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Plaintiffs have filed an Employee Retirement Income Security Act excessive fee lawsuit against printing company the Taylor Corp. in the U.S. District Court for the District of Minnesota, claiming their retirement plan’s fiduciaries have failed to control recordkeeping costs charged to plan participants.

According to the complaint, at all times during the proposed class period, the plan had at least $575 million in assets under management. As of December 31, 2020, the plan had net assets of more than $877 million and 12,157 participants with account balances, according to the plaintiffs, who say the plan’s size qualifies it as a large plan in the defined contribution marketplace.

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“As a large plan, the plan had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments,” the lawsuit states. “The defendants, however, failed to exercise appropriate judgment and permitted the plan’s service providers to charge excessive administrative fees and expenses.”

Using arguments that closely resemble other lawsuits filed by plaintiffs represented by the increasingly active law firm Capozzi Adler, the plaintiffs here allege that the defendants breached the duties they owed to the plan and to the plaintiffs by failing to adequately monitor and control the plan’s recordkeeping costs.

The Taylor Corp. has not yet responded to a request for comment.

“The defendants’ mismanagement of the plan, to the detriment of participants and beneficiaries, constitutes a breach of the fiduciary duty of prudence, in violation of [ERISA],” the complaint states. “Their actions were contrary to actions of a reasonable fiduciary and cost the plan and its participants millions of dollars.”

Based on this alleged conduct, the plaintiffs assert claims against the defendants for breach of the fiduciary duties of prudence and failure to monitor fiduciaries. In addition to naming the company as a defendant, the lawsuit also targets members of the board of directors, as well as other officers of the firm who serve on the retirement plan’s fiduciary investment committee.

According to the text of the complaint, the plan has discretion to charge each participant for expenses of plan administration, including recordkeeping. However, the suit claims, the disclosures that are provided to plan participants fail to state the actual amount of plan administrative fees and expenses that have been or will be incurred by each participant. The suit contends that the plan sponsor and service provider have agreed upon a fee of $42 per participant annually to cover the cost of administrative services. It further states that these costs “may or may not be charged to participant accounts on a pro rata basis or a per capita basis, as the plan fiduciary chooses,” and that any charges to participant accounts may vary from year to year and are based upon the plan’s rules.

“In this case, using revenue sharing to pay for recordkeeping burdened the plan’s participants with excessive, above-market recordkeeping and administrative fees,” the lawsuit claims. “The defendants claim that Merrill Lynch agreed to a fee of $42 per participant to cover the cost of administrative services. However, as shown in the chart [included in the complaint], the plan’s per participant recordkeeping fees averaged $83.37 during the class period. There is no indication in the plan’s [Form] 5500s, auditor’s reports or participant fee disclosures that the plan ever received rebates of the recordkeeping fees in excess of $42 per participant.”

The lawsuit goes on to claim that the plan’s fiduciaries, had they acted prudently, would have negotiated recordkeeping fees in the range of $20 to $35 per participant.

The full text of the lawsuit is available here. 

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