On a weekly basis, I talk to myriad people at events, social gatherings and in the process of doing business. Somehow we always end up talking shop. The number one question I get asked is, “What should I do with my 401(k)?” To clarify, I ask, “What do you mean?” Their follow-up question is, “Well, how should I invest it?” To which I respond, “Who is the advisor on your plan? Just ask them.” I can’t tell you how many times they answer, “But I don’t know who that is,” or “I don’t think we even have a plan advisor.” To me, this is inexcusable; at the very least, employees should know who the advisor is for their company retirement plan. This caused me (and should cause you as a business owner) to wonder: What do your employees really think about your 401(k) plan?
According to the most recent statistics provided by the U.S. Department of Labor, there are 638,390 defined contribution retirement plans in the U.S. (513,000 of which are 401(k) plans), covering more than 88 million total participants (of which more than 73 million are active) [source here]. Most full-time American workers and employees of large companies have access to, and participate in, defined contribution plans. Nearly 80% of full time workers have access to employer-sponsored retirement plans, and more than 80% of those participate in the plan. At companies with 500 workers or more, 89% have access to employer-sponsored retirement plans, and 90% of those employees participate. [source here]
Participation in these plans is as strong as it’s ever been, so Plan Sponsors need to realize that as a fiduciary, it is their responsibility to make sure their employees are having their retirement needs fulfilled. So it follows that Plan Sponsors should be looking for more from their advisors than ever before. The advisor that does the bare minimum to oversee two or three 401(k) plans just isn’t going to cut it. If an advisor isn’t living and breathing the ins and outs of a retirement plan on a daily basis, chances are they are not staying up-to-date and educating the Plan Sponsor and participants accordingly.
When a Plan Sponsor’s employees are asking outside advisors what they should be doing with their 401(k), it exemplifies that they either don’t know the advisor or they are not comfortable enough with them to ask. It’s good practice, as a Plan Sponsor, to regularly take the temperature of plan participants. Check in on how they feel about the record-keeper and the advisor, especially new hires and younger employees. One of the most important aspects to being a 401(k) plan advisor is to make sure the participants have enough information to make informed investment decisions. At the very least, your plan’s advisor should hold education meetings for plan participants once a year. I’d even argue that it should be more frequent, but this may depend on the number of participants in your plan.
A robust 401(k) is only as successful as the participants within it. If they aren’t happy with the plan, or are unsure of what to do when faced with investment decisions, it’s time to address these issues. Start by talking to one or two employees a week to gauge their knowledge of and comfort with the plan, record-keeper and advisor; you may get some feedback that is vital for you and your current service providers. At the very least, your employees will appreciate your taking the time to ensure their satisfaction with your company retirement plan.
