Editor’s Note: This is the latest in a series of posts by speakers at the 2013 NAPA/ASPPA 401(k) Summit, March 3-5, 2013 in Las Vegas. Brodie Wood, Vice President, Transamerica Retirement Solutions, offers insights on how in the fields of health care and higher education, retirement savings plan practices and plan design are being examined as never before.
By Brodie Wood
A lack of retirement readiness among aging Baby Boomers is having a powerful impact on the outlook of plan sponsors in the health care and higher education industries, encouraging them to review plan designs in light of likely outcomes and to actively seek the counsel of professional retirement plan advisors.
In the health care industry, sponsors have had a longstanding preference for working with advisors for help in achieving plan objectives. But new research conducted by Transamerica Retirement Solutions and the American Hospital Association, Retirement Plan Trends in Today’s Healthcare Market – 2012, suggests that a reliance on advisors is increasing as sponsors confront greater regulatory demands and growing administrative responsibilities.
In addition to a growing interest in participant outcomes, private colleges and universities are dealing with a changing tax law that requires an additional tax filing for Form 5500, and with a new emphasis on fiduciary responsibilities under qualified plans. The result? Higher Ed sponsors are approaching advisors for help with administration, taking plans out to bid, building investment policy statements and monitoring plan fees.
Opportunity Beckons in Plan Design and Fiduciary Risk Management
A working knowledge of sponsors’ objectives and areas of concern can help retirement plan advisors reach out to new clients, demonstrate their expertise and immediately prove their value. Following are checklists of sponsor “pain points” in each industry.
Questions Plaguing Health Care Plan Sponsors
• What’s the most efficient, effective approach to plan design?
• How do I measure plan effectiveness? Should I use: participation rates, deferral rates, income replacement ratios or some combination of all or some?
• Should I adopt automatic escalation, automatic contribution escalation and other automated plan features? Do behavioral finance elements really work?
• Can plan participants be educated and motivated to make appropriate investment and distribution choices?
• What is the best approach to managing my exposure to fiduciary risk under the plan?
• Should I consider a holistic approach to DB/DC plan administration in the form of Total Retirement Outsourcing?
• How do I provide participants with a method of converting their plan assets into guaranteed lifetime income?
Questions Provoking Deep Thought in Higher Education Plan Circles
• Is my plan too complicated for participants? Are there too many investment options, plan providers and communications vehicles involved? Is simplicity of plan design more likely to produce better outcomes?
• How can I stay on top of changing regulatory requirements and their impact on my fiduciary exposure?
• How should I manage participant education and communication? Are there conflicts of interest involved when providers offer this service?
• How do I address poor customer service from providers? Is there a way to make fees more transparent?
• How can I simplify plan administration?
• Where can I get help in managing fiduciary risks?
• Do participants know how to convert accumulated balances into guaranteed lifetime income?
The Bottom Line
In an era of uncertain long-term performance and volatility in the capital markets, it’s important to establish stable client relationships. But it’s also important to look for opportunities to grow your business in new markets with niche expertise.
Retirement savings plan practices and design are being examined as never before in health care and higher education. And the talents of an experienced, motivated advisor have never been in greater demand. The opportunity is apparent, and the time is right.
Brodie Wood will join Ryan Gardner of Fiduciary Investment Advisors, LLC for Workshop 8, “Grow Your Business — Techniques to Help Advisors Consult to the Health Care and Higher Education Market,” in Las Vegas on Monday, March 4 at 8.00 a.m.
Transamerica Retirement Solutions does not provide tax, legal, insurance, or investment advice and nothing presented herein should be construed as a recommendation to purchase or sell a particular investment or follow any investment technique or strategy.
FA -11808 (2/21) ©2013 Transamerica Retirement Solutions Corporation. Used by permission.
