What are the most common challenges in managing employee retirement benefits and how can they be addressed?

While this prompt calls plan design one of the “first challenge” maybe plan design should be labeled a “vital” or “crucial” first challenge. Why? Well, investments may be more fun to talk about, but proper plan design recognizes that it is hard to INVEST one’s way to retirement. One must SAVE their way to retirement. Proper plan design puts first things first. The great news is terrific fin/retiretech solutions are now on the scene to help Retirement Plan Advisors and plan decision makers calibrate plan design to serve employees and the needs of the business. These solutions are vital as a high volume of new private sector plans are being created.

Scaled Plan Governance is the foundation of what employers are seeking. Next up the employer wants some visibility toward an ROI on their benefits spend. They also want guidance on what to offer to better connect with employees and separate their benefit stack from their competitors in the war for employee talent. Employees want simplicity of the UX and a personalized approach they currently are not receiving within benefits.

Common challenges in managing employee retirement benefits include: Complex Regulations: Address by staying updated on changing laws and seeking legal guidance. Employee Engagement: Overcome by educating staff about benefits through workshops and personalized communication. Cost Management: Mitigate by reviewing plans regularly, exploring cost-effective options, and negotiating with providers. Diverse Workforce Needs: Address by offering flexible plans to accommodate varying employee preferences and needs

401(k) plan design can often have a sequencing. First, make sure you have a plan at all. Cost: recordkeeping/participant fees, fund fees, advisor fees. Second, I see people thinking through employer contributions like matches. Ideally, a SAFE harbor, so that the plan passes non-discrimination more easily. Additional cost: 3% salary Third, it's thinking through profit sharing. Honestly, I think this is the most underrated one, because it's a business expense it can help dramatically lower employer taxes and help boost employees. Cost: variable Fourth, if the employer has a plan, that's SAFE harbor, and they're maxing out on profit sharing (a very profitable company), then they can get into defined benefit, too. Cost: variable

Think like a financial advisor. Advisors want to help their clients align their money and investments with their goals. Education needed may be: Do employees have investments that align with their goals and do they know about them? (I see younger employees wanting more sustainable options, in this case you'll want to help them understand their options) Do they know about the power of compound interest and the tax advantages of a 401(k), ROTH or traditional. Do they know how to access their account? Do they have overall financial literacy to manage their own money? And can you address the specialty questions as they come up: taking a loan out on a plan; hardship; etc. So much complexity, that requires education.

Plans actually have a regulatory component of non-discrimination testing in place. But that's often not sufficient. The Workforce and Organizational Resource Center argues that a key factor for inclusion is having a non-elective 3% contribution for your SAFE harbor plan, as the match can implicitly exclude people who can't afford to contribute to their plan. For profitable businesses, profit sharing is a great option. And I think the biggest gap out there is in financial education. I was presenting to a company, but a formerly incarcerated employee was struggling. And it wasn't until I had him tell his own story about money and then I was able to relate his own money story to the principles which created the aha moment.

Honestly, one of the best tech innovations is just payroll integration. It removes 20 - 60 minutes of work every pay period, and improves accuracy. It's not perfect, you still gotta check, but that's a simple win. Beyond that, it's about using analytics to see what your employees need and engaging them. Purely, surveys. And you taking action. I think the AI component is better used for the backend on recordkeepers than it is for plan sponsors at this stage. The advancement of technology has also corresponded with phishing, and educating your employees (which is necessary just generally) on phishing is important.

I think there's going to be more variety in target date funds. We've thought in terms of passive investments, which dominates the market, but there are already ESG target date funds. I believe there will be more in climate investing. This trend alone I believe will reshape what it means to be a fiduciary, in which you'll be offering 3 types of target date funds that align with the individuals at your company. I also think we'll start to think through private market asset classes. And I think there's going to be much more focus on education. For a long time, we have thought this is an investment question. I think the People leader of the future is going to be thinking about how many of their employees have long term financial security.