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5 Things Every Employer Needs to Know About Retirement Plans
No CommentsRetirement plans are seen as an attractive benefit for employees. But if you’re offering one, there are several things you need to know to ensure your company and your employees get the most out of it. Here’s what you need to know.
It’s a Vital Benefit
Employees are looking for a retirement plan — preferably one with a match — as part of their total compensation package. “In this day and age, it is essential to offer a retirement solution for your employees,” says Joshua Scheinker, senior vice president at Scheinker Investment Partners of Janney Montgomery Scott. A strong retirement plan is a benefit you can use to recruit and retain top talent, and to help your employees to save for their future.
You Have Responsibilities
The Department of Labor is doing extra due diligence on retirement plans, Scheinker says, and so any plan sponsor you work with needs to be an expert on the fiduciary risk involved with managing a retirement plan. “This is a proactive conversation that includes a fee review and investment review.”
Jonathan Leidy of Portico Wealth Advisors adds that it’s important to understand that employers that sponsor retirement plans carry their own significant fiduciary responsibility. “Sponsors encounter a litany of compliance responsibilities — ensuring timely transmittal of payroll, properly managing eligibility and auto-enrollment requirements, delivering notices/disclosures in a timely fashion and so on.”
You Take on Some Risk
As with any investment, there is some risk involved. Sponsors’ duties include the prudent selection, monitoring and maintenance of the investment options within their plans, Leidy says. “Oftentimes, sponsors are under the impression these fiduciary responsibilities are either shared or wholly borne by their vendors, i.e. brokers, platform providers, and so on. However, unless a vendor partner expressly states that they are taking responsibility in a written document, they are likely not doing so.”
You’re Required to Offer Value
Costs involved with any retirement plan must be “reasonable,” which is not specifically defined under DOL rules, Leidy says. “In general, it’s accepted that testing fee reasonability involves knowing what you are paying (‘all-in,’ not just some of the costs) and understanding the services rendered for said fees and how they compare with similarly priced offerings in the marketplace.” The plan sponsor must offer a plan that delivers the most value to participants, he explains, not the least expensive one.
Communication is Key
The best way for employees to get the most out of their retirement plan is for them to know about it. A strong benefits communication program will help educate your employees about their retirement planning options and help them pick the right one for their needs. “The plan sponsor really needs to be interactive with their employees,” Scheinker says.
Given all of the time and effort required to sponsor a plan, Leidy says it simply makes sense that employers ensure their employees learn as much as they can about their plans. “Otherwise, the act of offering a plan can quickly be reduced to little more than window dressing.”
If you’d like to learn more about how you can offer a retirement plan as part of your employee benefits package, contact us. We’re here to help and happy to discuss the options available.
HR Solutions is a human resources outsourcing firm based in Baton Rouge, Louisiana. We eliminate human resources headaches for businesses with 10 to 1,000 employees by handling their payroll, employee benefits, regulatory compliance and other staffing needs. Contact us to learn how we can streamline your company’s human resources function to save money and reduce risk.
