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How Retirement Plan Sponsors Can Manage Liability Risks and Promote Retirement Readiness

Financial wellness resources protect retirement plan sponsors from litigation and help ensure a better future for employees.

By Rick Kent

Recently, I had an eye-opening meeting with a new client — a retirement plan sponsor — together with the plan's financial advisor in connection with a 401(k) plan the sponsor established many years ago.

Two of the plan participants nearing retirement were considering a legal complaint against the sponsor and advisor. Their problem? Having enrolled in the plan late in their careers and, in their view, not being educated thoroughly about the plan's investment options, they felt financially unprepared for retirement.

The client was justifiably frustrated, having given all employees the option of enrolling and arranged for a fairly comprehensive menu of investment selections. He'd also just spent many months working with the plan advisor to ensure compliance with the Department of Labor (DOL) fiduciary rule. Beyond that, he felt it was up to the plan participants to figure out their own needs.

Unfortunately, however, such plan participant complaints are taken very seriously by the DOL and plaintiffs’ bar, highlighting the liability risks plan sponsors and their advisors face.

A potential solution? Plan sponsors can strive to protect themselves, build stronger businesses and ensure a better future for their employees by actively nurturing retirement readiness for their employees by offering financial wellness resources in connection with company retirement plans. 

Here are three key steps to consider:

  1. Make plan enrollment automatic. Making auto-enrollment automatic with an "opt out" choice for each employee upon being hired maximizes the timeframe for which every plan participant is invested, thereby enhancing their retirement readiness. This also demonstrates to regulators and the courts that the plan sponsor has taken steps to optimize employee enrollment in the plan from the outset. With that said, this should be viewed as merely a first step — one that is part of a broader raft of financial wellness efforts.
  2. Offer ongoing and retirement goals-based education and coaching programs. Once automatic enrollment for all employees is established, it's important to address the fact that, without proper guidance, plan participants often end up with investment strategies that may not be the best match for their future retirement goals. Plan sponsors or advisors should provide participants with ongoing education and coaching resources — ranging from informational meetings, to tailored online resources, to predetermined and frequent touch-base points with a financial wellness professional. These resources should help participants identify their target retirement age, life objectives and the resultant financial goals they must reach together with the plan contributions they'll need to make over time.
  3. Provide analytics tools that track progress and quantify key metrics. It's essential to have ongoing financial wellness data tracking and analytics tools that illustrate whether plan participants are progressing toward their goals, and if not, what possible adjustments can be made to get back on track. Ideally, such tools should also benefit plan sponsors, allowing them to quantify all the ways in which their company-sponsored retirement plan is benefiting both participants and the company. Beyond participant retirement readiness, this should encompass other tangible benefits, such as how greater levels of plan participation may have reduced anxieties among employees related to personal finances, and in the process, boosted firm-wide employee productivity.

Given the looming savings crisis in America, tax-deferred company retirement plans represent the last great hope to many workers who want to retire with dignity. 

Regulators increasingly view this as a crucial responsibility for plan sponsors and plan advisors. A good way for plan sponsors and plan advisors to work toward ensuring that their businesses are protected while plan participants are well served is to enhance plan offerings with truly robust financial wellness resources.


Rick Kent is president of Merit Financial Group, an independent hybrid RIA group with nearly $900 million in client assets that operates Worksite Financial Wellness, a third-party financial wellness services provider for the retirement plan space.

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