Looking Ahead

The beginning of a new year is time for looking back and ahead. For plan sponsors, that might mean reviewing plan design ­elements, a fund lineup, or participant education initiatives. PLANSPONSOR­ spoke with Elaine Sarsynski, executive vice president of ­MassMutual’s Retirement ­Services Division and chairman of MassMutual International, about what the industry took away from 2013, what plan sponsors can look forward to in 2014, and how they can improve retirement plans in light of that reflection and planning.

PS: Let’s begin by reflecting on 2013. What do you think the industry learned last year?

Sarsynski: Fee disclosure was something that we all focused on significantly over the last 16 to 18 months. What we learned in 2013 was that it was not nearly as disruptive to the industry as many had feared and, for the most part, sponsors really did not overreact.

I think it was almost a non-event for participants, which I believe indicates that the industry had been disclosing sufficiently.

The other thing that we’re seeing more is that sponsors are far more interested than they’ve ever been in retirement outcomes for their employees and participants, and they appreciate providers that can help them with the overall retirement readiness of their employees. We’ve seen repeatedly that sponsors want to know how many people are on track to retire with sufficient monthly replacement income.

Plan participants are becoming more aware of their retirement readiness, and they’ve been waking up to the fact that savings is important and that it’s critical to take action to improve their ability to save more and appropriately allocate in retirement. 

PS: What trends in the retirement plan landscape do you anticipate as we look to 2014?

Sarsynski: We’re going to see increasing numbers of tools for the advisor, sponsor and participant coming out next year. Most of the tools will enhance the awareness of retirement readiness and plan health; for example, we have a very robust tool that ties into the recordkeeping data for a plan. We feel very confident in the analysis that these tools provide to sponsors and participants as to whether they have appropriate plan design, plan allocation and participant allocation across the funds in the plan.

We are very pleased with how our tools have been driving action at the participant level and how much advisors and sponsors value the tools, so we would expect to see more focus here. I also think that we’re going to see a significant focus on health care and health care exchanges and how that may impact an employer’s focus on retirement. We’re watching, as everybody else is, to see how the new health care programs are going to impact our industry.

On the investment side, about four years ago, we launched a custom-allocation modeling tool, and we’ve been making upgrades to the tool over the past several years. We have seen increased utilization of custom asset-allocation models, which can either be designed by the advisors with whom we work or by a third-party money management firm.

Essentially, what the modeling tool does is take various funds and allow the advisor and the provider to help the plan sponsor better customize a lifecycle fund based on the underlying demographics of the plan participants. We really think that’s a trend that’s going to continue for plan sponsors and participant needs going into the future.

From a broader market perspective, as the markets and interest rates are improving funding status for traditional defined benefit plans, there are now more alternatives for the CFOs [chief financial officers] to think about decreasing that liability on their balance sheet. In 2014, we’re going to see an increase in terminal-funding opportunities. We were especially active in the terminal-funding market in the last six months of 2013.

Finally, in 2014 we expect the regulatory awareness in the DC [defined contribution] industry to increase as Washington and our regulators and legislators continue to review the defined contribution and defined benefit [DB] industry and hopefully support improving retirement readiness in this country.

PS: How are you at MassMutual preparing to address the host of trends that you just talked about?

Sarsynski: We will be expanding the capabilities of our custom-allocation modeling tool. MassMutual will be introducing the availability for a world-class money management firm to maintain the allocations of the lifecycle strategies within the custom allocation models.

We’re already a leader in leveraging data to deliver customized touch points to increase positive participant actions. We do face-to-face meetings; we have a terrific call center, targeted-mail campaigns, email campaigns and we are refining all of our marketing data personas and will continue to refine the experience at the participant level throughout the year.

Much of our work around personalizing the messaging to the participant is based on someone’s data and demographics. This is through the use of data that we have in our CRM system, and we really look at that data in order to target a participant so that he can take his next-best action step. We have dozens of personas that we use to target the messaging to make it most effective for any individual in a plan. We’ll continue to do more of that next year, and those are certainly trends that we’re preparing for as we speak.

We believe employees also want to understand their entire workplace benefits package. We are working to provide a way for an employee to holistically look at his worksite benefits, and we’re working on a variety of tools for plan sponsors to help them find an appropriately-matched product to the demographic in the plan. 

PS: How do plan sponsors look at the trends and determine what their plan priorities should be for the year?

Sarsynski: First, I would continue to work with your advisors and providers to assess the retirement readiness of your employee base. If you haven’t done so already, you must be able to, in our humble opinion, address the question, “What percentage of your employees are on track to retire with sufficient replacement income?” Whether that’s 75% or 80%, at whatever age you choose, 65 or 67, what percentage are on track?

We believe that this cannot just be done with averages or by looking at historical figures. This should be done by analyzing the data that is in the recordkeeping system to put plan design changes in place that target the plan participant to take the next best step to improve his retirement outcome. Therefore the plan sponsors should also make sure that the data the plan provider has in its systems can help to deliver these approaches. A plan sponsor should ask the plan recordkeeper “Do you have the resources locally to be able to have enrollment meetings and one-on-one meetings and call-center excellence to support our retirement readiness initiatives?”

Second, I believe plan sponsors should develop reasonable goals for plan improvement. Once the plan health diagnostic is done, plan sponsors should develop reasonable goals to improve the overall plan health. For example, as you think about plan design or the participant, increase the percentage of participants that are on track for retirement success by three or four percentage points within a year—put specifics to the goals so they can be appropriately benchmarked.

Make sure you can measure outcomes of the campaigns that your provider is running for you relative to saving, allocation, etc. Know how much additional cashflow of savings has been added by participants to their particular plan. Having metrics in place to measure success is critical, and as a provider, we have those metrics and we can measure exactly how effective plan campaigns have been.

As I mentioned before with the data, a plan sponsor wants to ensure the plan provider is equipped with the tools, campaigns and relationship managers to help achieve plan goals and provide retirement readiness at the participant level.

©2014 Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001. All rights reserved. www.massmutual.com. MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) [of which Retirement Services is a division] and its affiliated companies and sales representatives.

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