Pandemics, political and policy changes, volatile investment markets—another year under the belt. WealthManagement.com asked several retirement plan industry leaders for their thoughts on the past year’s most important developments for plan advisors.
Wealth Management: What do you view as the key developments that affected retirement plan consultants’ work with plan sponsors in 2021?
Global Chief Commercial Officer
Aon Wealth Solutions
2021 was the first year for pooled employer plans (PEPs). This had a significant impact on the market as plan sponsors now have the ability to join forces with other employers and run more efficient retirement programs for their plan participants. Some advisors have chosen to create PEPs for their clients and others have chosen to help employers fulfill their fiduciary duty to select the best programs for their plan participants.
Similar to 2020, the global pandemic also had a significant impact, of course. Advisors have had to meet with plan sponsors and plan participants virtually, rather than in person. Many more participant educational tools are now available online via on-demand videos, which are used much more frequently than in-person meetings.
Head of Retirement
Morgan Stanley at Work
At the end of 2020, the pandemic’s effects were only partially known. This year, the reverberations of COVID-19 hit businesses hard. Faced with supply chain issues, inflation or the Great Resignation, businesses with retirement plans must make some tough decisions. This means that advisors will be asked to suggest alterations to plan design, potential divestitures and possibly plan termination. On the flip side, regulators are pushing hard for retirement coverage, so companies without a plan offering are seeking advisors who can provide guidance on finding the best providers.
For those companies with plans to keep their retirement program in place, adapting to a virtual communication and education platform has been relatively seamless given webinar and conference technology. Advisors and consultants should embrace this as an ongoing part of their business model. As time passes, it will be interesting to see if virtual education meetings fully replace in-person ones as travel costs rise; many employees are experiencing Zoom fatigue and want to communicate through means other than webinar.
Head of Defined Contribution Marketing
In 2020, retirement plan consultants primarily focused on navigating plan sponsors through the implications of the SECURE Act and the CARES Act. They also dealt with participants’ retirement readiness concerns by guiding them through the market’s volatility.
With no new major retirement legislation in 2021, retirement plan consultants focused on the fiduciary responsibilities of the plan sponsor. Maybe the plan sponsor needed guidance on reinstating a matching contribution they suspended in 2020, or their plan’s recordkeeper could’ve been acquired by another and the plan sponsor wanted to know how this would impact their plan. Whether it’s market volatility through unprecedented times or the everyday workings of properly managing a retirement plan, these challenges highlight the increasing importance of plan sponsors working with a retirement professional.
Executive Director of Institutional Retirement Income Council
Principal of Fiduciary Insurance Services, LLC
2021 has been a volatile year for the world as we all adapt to changing expectations about what constitutes our “new normal” as COVID-19 has become an endemic rather than pandemic concern. For plan consultants, becoming adept at delivering valuable advice via remote and quickly digestible formats has become critical to survival.
In addition to COVID-related impacts to consultants’ businesses, another recurring theme in 2021 is attention to the retirement tier of the DC plan experience. Plan sponsors are increasingly interested in retaining participants in plan through retirement, not just until retirement. Plan consultants are reporting that nearly every RFP of 2021 has asked about their capabilities in addressing retirement income from plans. Plan consultants are having to get up to speed on the rapidly expanding new generation of both guaranteed and non-guaranteed solutions designed to provide income from plan assets rather than via rollover. Many questions are arising from consultants about which income solutions make sense to recommend as a QDIA as distinct from available within a plan menu, as sponsors raise concerns about how best to help employees manage turning their account balances into reliable income streams; these questions arise in part from anticipation of questions coming from participants in earnest once SECURE provisions requiring balance-to-income translations on participant statements are experienced in 2022.
Lastly, plan design elements that encourage additional savings and that prevent leakage are top of mind for sponsors this year, particularly in light of proposed legislative changes designed to encourage these enhancements to DC plan defaults. Auto-enrollment, auto-escalation, emergency savings options, student loan matches, and products/services that are adaptable to the participants unique attributes (including managed accounts) are increasingly on the minds of consultants and sponsors.
Principal, Strategic Retirement Consulting
Plan design has come a long way and plan sponsors are continually looking for ways to drive positive outcomes for their clients. The passage of the CARES Act, and subsequent activity, showed us that the majority of participants remained steadfast on their retirement journey, credit to strong plan design, but a modest portion of workers did access their retirement savings. As such, the pandemic identified a need for plan sponsors and consultants to pursue overall financial wellbeing strategies to support their participants’ financial journeys.
Experience tells us that as the retirement industry continues to evolve, plans will increasingly be designed to produce positive outcomes that are both financial and emotional. There is a heightened focus on delivering a holistic financial wellness platform including personalized advice and guidance; reliable, high-quality investments; and a human-centered experience.
Looking ahead, in addition to financial wellbeing, plan sponsors and consultants should continue to keep a close eye on the progress of key retirement policy efforts, including SECURE 2.0, which may improve investor outcomes.