Balancing resources with DC retirement plan outcomes 

Retirement plans are a foundational element of employees’ financial wellbeing and a critical workforce management tool for many organizations. Defined Contribution (DC) plan sponsors are tasked with acting as fiduciaries, providing access to high-quality investment options, and keeping up with a seemingly endless list of regulatory and legislated plan design-related changes. Balancing these responsibilities with supporting a wide range of employee financial goals and working to maximize resources allotted to DC plans can feel like playing an intricate game of chess. In times of market uncertainty and shifts in the geopolitical landscape, this game becomes even more complex. The following are three areas to consider exploring that may help formulate a winning strategy:

Evaluating administrative fee payment methods

As many DC plan sponsors know, one critical fiduciary imperative is to benchmark plan-related fees and help ensure the reasonableness of such fees. Approximately 61%¹ of plan sponsors have participants pay for recordkeeping fees, while other companies cover the cost of plan administration in part or in full. Conducting a recordkeeper fee benchmarking (sometimes called an RFI) can help support fee negotiations while also providing the opportunity to assess which fees are passed through to plan participants. Periodically evaluating all services through a more robust request-for-proposal process (RFP) can further allow for service adjustments in conjunction with fee negotiations, which may enhance the overall DC plan participant experience.

Consider the breadth of vendor relationships

There has been an increase in the number of recordkeepers offering financial wellbeing or even health-related (e.g., HSA) offerings, either on a proprietary basis or through third-party relationships. Evaluating what additional services may be applicable to your employee population could provide opportunities for cost efficiencies by contracting with a single provider while also enhancing participant experience with more integrated websites and communications. Times of market volatility can often lead to additional financial stress for employees, so evaluating their needs and providing additional services to complement the retirement plan (e.g., financial coaching, loan refinancing, etc.) can provide welcome support. Plan sponsors should always assess the needs of their specific population and consider their fiduciary responsibilities.

Outsourcing

As both investment, plan design, and administrative complexity continue to grow for DC plans, plan sponsors may wish to consider whether delegating certain responsibilities could help alleviate strain on resources and possibly provide cost savings while enhancing participant experiences. There are a variety of ways to outsource DC plan responsibilities, from investment-only delegation (often referred to as OCIO) to joint investment and administrative delegation. More recently, Pooled Employer Plans have become available, allowing companies to holistically outsource investment and administrative functions. Outsourcing can sometimes bring about greater economies of scale, leading to lower expenses, in addition to fiduciary reassurance from enhanced professional oversight and implementation of investments and plan administration.

Watch our webinar replay to learn more about cost optimization and employee wellbeing strategies.

_{¹ 2024 Plan Sponsor DC Survey}

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