Amid the fallout from the pandemic, HR directors are stretched thin and depend heavily on their advisors—but sometimes they’re not on the same page, according to plan sponsor executives at this week’s NAPA 401(k) Summit.
Moderator Nevin Adams, Chief Content Officer of the American Retirement Association, led a panel discussion on the execs’ perspectives, experiences and priorities, as well as what they want from their plan advisor. Joining Adams were Robin Hope, Director of Human Resources at Megger; Sally Ihmels, Director of Human Resources for the City of North Las Vegas; and Ira Finn, Vice President of Compensation and Benefits for the Ryan Specialty Group.
Serving as a Partner
Asked what they would like their advisors to understand better about their role as a plan sponsor, one of the key sentiments was that plan sponsors want their advisors to be partners in running their plans. “I want them to be another extension of my team to really help us move our plan forward. There are all these great topics—ESG, plan design, emergency funds—I want them to be there. The committee really looks at them for their recommendations, really takes their advice, and so I just want them to be another member of my team and to think like that,” Finn explained.
Agreeing with that characterization, Hope explained, “You have all of this knowledge that I want to cherry pick. I want the high level, I want you making good decisions, and I want you to come to me and say, ‘Robin, you need to know about this; this is the minutia, but this is important, and we’ve got to get your committee on board with this and here’s how we plan to do that.’”
Similarly, Ihmels noted that she wants their advisor to be a partner, understand their population and serve as a problem solver. “Understand that we depend on you, we lean on you, we don’t have a lot of bandwidth—all of us mentioned that—and I think that’s where you come into play and you’re a superhero for us, so we need you to be there,” she explained.
Hope shared a story about how an advisor would come into quarterly meetings and literally read from a prepared report. “He’d sit down with us in the committee and say, ‘Okay, open your books to page six,’ and he would literally read it to us, and I remember sitting there the first time thinking, wait, I can read, so let’s have a conversation.”
That is now one of her pet peeves, she added, explaining that she prefers having a conversation and the ability to ask questions when she wants to dive deeper into a particular topic. “I’m not an expert. I get that. That’s why I hired an advisor, but I am smart enough to understand what’s happening and I need to fulfill my fiduciary duty. And that’s what Im looking to my advisor for is that intelligent conversation so that I do understand it,” she explained.
Finn had an encounter in which he believes he caught his advisor off guard, and perhaps even scared the advisor, when he asked the person to take on fiduciary responsibility either as a 3(21) or a 3(38). “I didn’t realize that that would really catch them off guard. For me, when I’m working with the advisors, I’d like some fiduciary responsibility on the other side of the table. For me, that’s really important when you’re giving us recommendations and advice—that to me is a showstopper.”
Referring to the advisor/plan sponsor relationship as a partnership, Finn emphasized that beyond quarterly meetings he’s also looking for input—for example, if there’s M&A activity or a merger coming up, or help with working with the provider for negotiating fees. “What else are you doing that I’m not just seeing you four times a year? ” he explained. “That’s the type of partnership I want to be in when I’m talking with my advisor.”
Biggest Challenges
What are the biggest challenges the execs are currently facing? Shared concerns include compliance challenges, communicating with participants and staffing issues in light of COVID. Hope believes that since people are doing well and making money in their plans, they are coasting and becoming somewhat passive and not really paying attention. “When we send out emails, I don’t get a response from them; so I think getting people to pay attention to what’s happening is a challenge at this point, because for them, it’s not a priority right now,” she observed.
Finn reported a similar experience when communicating with employees, noting that his firm is also seeing low open rates on emails. “I’m pushing back on my provider, saying we have got to think of different ways that we’re talking to employees, different messaging that we’re putting out there, because just to get a message read is really impossible these days,” he notes.
From Ihmels’ government perspective, she explains, one of their challenges also relates to communications and convincing their employees that they also need to be contributing to their plan, instead of having them think they can rely solely on their pension to get them through retirement.
The fallout from the pandemic has also created challenges. Finn notes that part of his job is overseeing compensation, and there has been an increase in people moving jobs, wanting to work remotely and asking for more money. “Working in an HR field, we’re all kind of dealing with COVID and what the return-to-work environment looks like. And at the same time, we’ve got employees leaving left and right, or asking for more money. It’s a very tough environment for employers right now.”
Red, Green or Yellow?
Turning to what he called the “lightning round,” Adams gave each of the panelists red, green and yellow sheets of paper, and asked them to hold up one of them signifying whether it’s something they’re thinking about doing (green), not doing (red) or are on the fence about doing (yellow).
The results turned out to be fairly consistent among the plan sponsors:
Financial wellness: This generally received greens across the board, with the panelists agreeing that it’s critical, needs to be done and is just as important as health wellness, particularly with helping employees learn about paying down debt, student loans, payroll loans and simple budgeting. That said, they noted that it remains difficult to get employee participation, as many employees do not sign up for it.
Student debt matching contributions: This appeared to get mixed reviews, with the panelists saying that it’s not currently a top priority, but may become one in the future as part of a holistic wellness program.
Emergency savings accounts: Similarly, this did not appear to be a current top priority, with the panelists saying that they are not currently looking at it as a separate program, but would consider it as part of a holistic wellness program that covers emotional, physical and financial wellness. Moreover, it was noted that if there was a way providers could easily implement such a program as part of their DC plan, like what is being discussed in Washington, they would be more in favor of it.
Health Savings Accounts: Overall, HSAs received positive reviews, with one panelist saying they have an HSA in place, with about a third of their workforce participating. Another also has one, and while they are starting to see improved savings rates, they are working to improve their communications around it. And the third doesn’t have one, but is looking to get one.
Target date funds: Two of the three panelists have TDFs in their plans, and all three agreed that they like the concept, noting that their employees like them, they’re easy to understand and their employees stay in them when defaulted.
Managed accounts: In contrast, managed accounts received mixed reviews. One panelist noted that they’re not as easy to explain to employees and there is confusion in understanding the differences in the funds, while another panelist believes they are a great option but agreed that there is some difficulty in communicating with employees about them.
ESG: Interestingly, despite all the talk about ESG, the panelists agreed that it is not currently on their radar. “I get it—it’s a big topic,” said one panelist. “It’s something that at some point is going to be adopted in the plans, but it’s just not something that we’re looking to do, and I hear that from all of my plan sponsor friends.”
