Data and Research December 11, 2019

Quarterly Statements Useful in Enhancing Participant Retirement Readiness

The quarterly statement is a proven tool for getting plan participants engaged in their retirement readiness; however, not all providers are including the best information to get participants engaged.

Reported by

It’s no secret that many, if not most, retirement plan participants do not read, or do not fully understand, the many communications sent to them. However, the one they are most likely to pay attention to is their quarterly account statement.

A 2016 syndicated study by Corporate Insight found that of the nearly 1,500 respondents, 82% said access to their most recent quarterly statement was “very” or “extremely important,” and 48% had viewed or downloaded statements at some point in the previous twelve months.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The quarterly statement is a tool for getting plan participants engaged in their retirement readiness. However, not all providers are including the best information to get participants engaged.

For Corporate Insight’s latest Retirement Plan Monitor Report, the firm examined the most up-to-date quarterly statements available on the participant websites of its coverage firms and found every firm makes statement archives findable from links within the main menu—what it says is a best practice. All recordkeepers covered by the report provide gain/loss information and contributions/additions information on quarterly statements, but Corporate Insight says plan participants should be able to see other details about what drives the change in their account balance. Eighty-five percent of recordkeepers supplement this information with investment-level summaries, and 54% provide source-level summaries.

Corporate Insight suggests that statements should also show how dividends and capital gains (62% of recordkeepers provide this information), transfers/exchanges (46%) and fees/expenses (85%) have impacted the plan balance. The firm notes that in recent years, the number of lawsuits regarding fiduciary responsibility has rapidly increased, many of which relate to excessive fees. “Clearly, given the current cost-sensitive environment of the defined contribution industry, it is imperative that firms clearly highlight both recordkeeping and investment fees on the participant website and quarterly statement. Among the firms in this report, 85% list plan fee and expense details on the quarterly statement, either within the quarterly activity summaries or within dedicated sections. However, we believe dedicated sections are the best way to clarify this information, and 62% of the firms in this report offer such sections,” Corporate Insight said in its report.

Aside from understanding what sources affect their account balance, retirement plan participants could use reminders of what they are contributing and what their employers match. Only 31% of firms in the report list employees’ current contribution rate on quarterly statements. Most firms (85%) list the contribution amount by source for the statement period and for additional timeframes (77%). Corporate Insight says employer matching information could provide helpful context for participants who use quarterly statements to assess whether they should make changes to their portfolios, but it found only two recordkeepers integrate this information within statements.

According to Corporate Insight, when communicated clearly and accompanied by methodology and assumption information, retirement readiness data enhances quarterly participant statements. Many in the retirement industry believe retirement income projections on statements would help participants in their savings and investing decisions as well as with planning for retirement. The Department of Labor’s Employee Benefits Security Administration’s (EBSA) in 2013 shared advanced notice of proposed rulemaking on the subject—followed by a comment period that saw some industry practitioners share concerns that the financial assumptions and calculation tools underlying such disclosures must be customizable enough to give participants an accurate income projection. Others said they were concerned that plan fiduciaries could be found to be on the hook for inaccurate—and especially over-generous—projections of income. No regulations have been issued regarding the provision of lifetime income projections on statements, and efforts in Congress also have not panned out.

Corporate Insight found that only 38% of recordkeepers’ statements include retirement readiness information. Among these firms, the selection of metrics varies greatly, with some listing only the monthly income projection, and one including both the monthly and annual retirement income projections, a retirement income goal and a gap analysis along with a forecast-style infographic illustrating the participants’ progress toward their savings goals. Since it last reported on statements in 2018, three recordkeepers have actually removed retirement readiness analysis from statements.

These are all items retirement plan sponsors can ask recordkeepers if they will provide.

Benefits December 11, 2019

ID Theft Insurance as a Voluntary Benefit

The insurance is a small cost to enhance employee financial security and hedge against lost productivity.

Reported by

Among the voluntary benefits that employers offer, identification theft insurance is becoming more popular.

The reason, says Daniel Struck, a partner with Culhane Meadows in Chicago, is that one in 25 people experience an incident of cyber theft or identification theft. “It is a widespread issue,” Struck says. “Without insurance, it takes a person 30 to 50 hours of their time to deal with the impact, that is, making phone calls and cancelling accounts. That is typically done during working hours, so employers realize this is a productivity issue.”

And, this insurance typically costs $3 to $5 a person per month, Struck says. LegalShield’s ID Shield costs $6.95 per person a month and $12.95 for family coverage, notes Emily Rose, senior vice president of sales for the company’s business solutions division. Rates are based on group size.

Rose agrees that employers are increasingly interested in offering identification theft insurance to their workers, with some employers covering the cost. “As more and more breaches appear in the news, they are getting employers’ attention, prompting more to offer this type of insurance as part of their overall financial wellness,” Rose says.

As to what ID Shield offers, it centers around “privacy and reputation management,” Rose says. “We start by monitoring personal and financial information and by conducting credit monitoring. We then cover the gamut, including the dark web and social media. We monitor all of that to insure people’s information is secure. Should a breach occur, our restoration services team steps in.”

ID Shield is also very sensitive to breaches to a person’s 401(k) or other savings account, Rose says. Starting in 2020, LegalShield will ask people for a threshold amount that they would likely use to withdraw money from their various accounts, and should a transaction occur above that sum, ID Shield will immediately notify the account holder to verify that they were the person directing that withdrawal, Rose says.

“Once a person finds a discrepancy in their account, they can contact our center,” Rose says. “The first thing we will do is shut that account down, and then help the person change their password and user name to secure all of their accounts. We will then send them paperwork to provide us with limited power of attorney so that our private investigation team can communicate with all of their financial institutions to secure all of their accounts.”

The team tries to have the financial institutions make any breached accounts whole, but should that fail, ID Shield also has an insurance policy that will cover up to $1 million of lost funds, Rose says.

But even if a person reports one problem, LegalShield is very proactive about examining all of his accounts by examining activity through all three credit bureaus, Rose says.

She says all types of workers and all types of companies are expressing interest in this type of insurance, and that when offered, it is very popular among workers. In fact, 70% of ID Shield’s group plan participants are enrolled in the identify theft family plan, she says. Furthermore, a survey that LegalShield conducted found that 50% of employees think employers should offer identify theft protection in their benefits package, and 89% of employees say that owning identity theft insurance provides them peace of mind.

As to what an employer should look for when selecting identification theft insurance, it is important to determine if they will reimburse people for out-of-pocket expenses incurred when dealing with a breach, as well as whether they are willing to reimburse people for stolen monies, Struck says.

“Find out what the scope of the coverage is,” he suggests. “Price, of course, is a factor to consider as well, and it is also important to get a sense of the insurer’s reputation and quality. This is a growing market and very much like the Wild West in its early days. There are insurers of very different qualities in this market. It is important for employers to take the time to make sure they are buying from an insurer that will be dependable in doing what it promises to do.”

«