With 2020 squarely in the rearview mirror, it is nice to look forward to the new year with an opportunity for a fresh start and a clean slate. What goals are you setting for the year and how are you going to achieve them? I have found if you write down your goals, and periodically revisit them, you are more likely to achieve them. In other words, document, and benchmark your objectives – otherwise, they may as well just be a dream!  

This year, you may be setting goals to achieve better outcomes in your health, relationships, and your business. As a business leader, you are probably thinking about your employees, too, and how you can improve their health, happiness, retention, and retirement outcomes. You should be thinking about enhancing their retirement planning as well. If your current 401(k) advisor is not engaging you and your employees, it is unlikely you will meet your goals and it’s time for a new perspective; here is how you can get started to improve your offering in 2021.  

1. Evaluate Your Advisor:

Aside from providing fiduciary support, you should expect your plan advisor to:

  • Engage the 401(k) committee on a quarterly basis.
  • Regularly benchmark plan investment options.
  • Show up.
  • Prove that the 401(k) pricing is fair to your employees.
  • Educate and provide financial wellness services to employees.

2. Formalize the 401(k) Committee:

This is typically our second action item when engaging new clients as most do not have formal committees in place. Committees are typically comprised of 3 to 5 people and include senior members of human resources, finance, and operations. The committee members should be aware that they, too, have a fiduciary responsibility. Your advisor should be meeting with the committee at least quarterly to review the overall health of the plan.

3. Review Your IPS:

A 401(k) Investment Policy Statement (IPS) can provide a vital roadmap to the continuing success of a company sponsored 401(k) plan. It frames how the plan undertakes its due diligence on behalf of plan participants and guides the plan sponsor both in its fiduciary duty and in its monitoring of third-party providers. Essentially, it details the investment goals and strategies on portfolio construction and ongoing management for all fiduciaries associated with the plan. While it is not a legal requirement, the U.S. Department of Labor (DOL), which has enforcement authority for ERISA has said that having an IPS is consistent with the fiduciary obligations set by the law. As the plan sponsor, you have ultimate responsibility for the investment policy statement, but it is typically the advisor who is responsible for designing it. If you do not have an IPS, we would be glad to create one with you.

4. Examine Plan Health:

The health of your 401(k) plan should be reviewed on a quarterly basis; if your advisor has not been engaging you to do that, your plan may be at risk. During quarterly meetings with the 401(k) committee, we discuss various metrics that comprise plan health such as the participation rate, savings rates, fund performance, and employee engagement. These are the metrics plan sponsors can use to evaluate whether the advisor has been effective at enabling positive changes in the participant experience. In cases where participation is low, mandatory group meetings are an effective way to communicate with employees as to the benefits of participating in the plan. Automatic enrollment can also drive plan participation; this essentially allows the employer to enroll eligible employees unless they affirmatively elect not to participate. It can be a great way to increase participation in your company’s retirement plan, but every plan is different, and each company has its own corporate culture. There is no one-size fits all approach.

5. Financial Wellness and Education:

The value of addressing employees’ financial wellness is clear. It is a topic we are passionate about and discuss frequently; it encompasses universal topics like managing expenses, reducing spending, eliminating debt, and creating savings. PricewaterhouseCoopers (PwC) revealed in its 2020 Employee Financial Wellness Survey that “financial or money matters/challenges” was far and away (at 54 percent) the most common cause of stress among full-time employed U.S. adults. In a previous PwC study, 47 percent of employees said financial stress either caused them to miss work or has negatively impacted their productivity. Today, employers are viewing financial wellness as part of a broad employee wellness initiative that has taken shape amidst the pandemic. Your financial wellness program, led by your advisor, should go far beyond simply making the right choices amongst the fund lineup in the 401(k). For many plan participants, the biggest challenges come from things like paying down credit card debt, saving for emergencies, college planning, and elder care for aging parents.

The new year brings with it an opportunity to put a new set of eyes on your plan… We have been very successful in reducing overall plan expenses, creating significant savings for employees and most importantly, building trusted relationships with management and employees alike. My firm works as an advisor and co-fiduciary to corporate 401(k) plans, specializing in the construction industry. We work with many UTCA member firms to enhance their 401(k) offering and build education programs designed to engage employees. We appreciate that each company is unique, and we take the time to understand how you operate before creating a customized plan that is suitable, low cost, high value, and ERISA compliant.  

Is it time to put your 401(k) plan out to bid this year?? If so, call me, Mike Meyers, at (732) 291-3338 for more information. 

 

Disclaimer: 

Mountain Hill Investment Partners is an SEC Registered Investment Adviser. We have a clearing and custody relationship with Fidelity Brokerage Services LLC, Member NYSE/SIPC.