EMPLOYEE SERVICES

Helping employees understand and make informed decisions about their participation in the retirement plan is not only a fiduciary responsibility, but it is critical in helping them reach their retirement goals. Plan sponsors should communicate the plan, make sure employees understand their options, and develop strategies that maximize participation.

Studies have shown that employees who rely on professional investment advice

1. earn nearly 3% more than those that do not employ help;
2. accumulate 55-70% more wealth over a 20 year period; and
3. portfolios constructed using help outperform those without help 87% of the time. 

However, unbeknown to most plan sponsors, ERISA has very specific rules for providing advice to employees that the plan sponsor must follow to receive a “fiduciary safe harbor.” Under ERISA, providing specific, individualized investment recommendations to participants constitutes investment advice – and persons who provide such advice are considered fiduciaries. Only independent Registered Investment Advisors (RIA) are generally permitted to offer investment advice to participants to avoid triggering fiduciary liability for the plan sponsor.

Discussions regarding the importance of plan participation, basic retirement planning strategies, retirement income calculators, and the impact of asset allocation on retirement investing are all considered education by the Department of Labor. While investment education guides employees, it cannot give specific answers to their investment questions.

Some advisors provide both education and investment advice to help the employees make sound investment decisions within their retirement accounts. However, unless specific requirements are met to address ERISA conflict-of-interest concerns (i.e. using a fiduciary advisor), the plan sponsor is exposed to liability for the outcome of the advice.

Periodic assessments help plan sponsors to understand how participants are using the plan and potentially identify action for improvements in plan design, communications, education, or retirement readiness. Some advisors perform regular assessments to gather information about the attitudes and behaviors of employees. This valuable information can help the plan sponsor tailor products and services to better meet the needs of employees.

To create a truly effective benefit for employees, plan sponsors should be looking at the bigger picture. Some advisors recognize that traditional enrollment methods alone are inadequate to help today’s employees and work with the plan sponsor to create targeted strategies with specific, measurable milestones. These goals can encompass things such as increasing employee participation, improving average saving rates, helping employees make better investment decisions, and whatever other areas are determined to be most important to the plan's success. The advisor should be able to set a clear plan that aligns these goals with strategies that help the plan sponsor achieve them.