HANYS Benefit Services

According to the 2014 Retirement Plan Survey conducted by HANYS Benefit Services, approximately one-half of the responding retirement plan sponsors offer automatic enrollment. Offered in conjunction with automatic escalation, such features can positively impact participant behavior and improve retirement readiness. This article examines some best practices to be considered when implementing automatic features in defined contribution plans that can produce greater results per dollar of employer cost.

Many participants lack the ability, time, and/or desire to effectively make sound investment decisions and manage their accounts on an ongoing basis. Traditionally, many plan sponsors felt their responsibility was to offer a broad range of investment options together with employee education. The results, all too often, were that participants were overwhelmed with choice and rarely availed themselves of the education. In recent years, the trend has been to limit the number of investment options and guide participant behavior. The investment menu structure may be just as important as the actual investment options themselves. An effective menu design will address the various participant behaviors: Properly done, a well-designed investment menu can direct behaviors and give participants the confidence they need to feel comfortable with their investment decisions. Read Improving Participant Outcomes: An Action Plan for Plan Sponsors and start developing your action plan to improve p

Plan sponsors should review their current plan design features and consider how they drive participant behavior. Studies have shown that participants will often choose deferral rates at a level to obtain the maximum employer match. By stretching out the matching formula, the employer cost stays the same but the employee is encouraged to save more. For example, a plan that matches 100% on the first 5% could move to a 50% match on the first 10% of salary. The employer cost remains constant at 5% while at the same time employees are motivated to contribute up to the 10% level. It is important to limit participants’ ability to use the money for something other than its intended purpose: retirement. Plan sponsors should consider limiting, if not eliminating, loan availability within their plans. Participants rarely understand the true impact of taking a loan from their account—“borrowing from themselves” is a common justification employees use. Although the current economic environment may

January 2016 was a particularly difficult month for equity investors, with the major U.S. equity indices in correction territory. China's economic slowdown and negative earnings in the energy sector are the most commonly cited factors for the possibility of a global economic slowdown. This paper, What's Driving the Recent Stock Market Volatility? , provides retirement plan fiduciaries and investors insight into the stock market volatility, including: the role of China and the energy sector as market drivers;  "dashboard" metrics showing where equity investors should focus their attention in 2016;  an analysis of the long-term relationship between corporate earnings trends and S&P 500 Index performance; and  an overview of the price/earnings (P/E) ratio and how much investors are willing to pay for those earnings.  If you have any questions about this paper , or would like to begin talking to a trusted advisor, then please get in touch by calling (800) 38

Until recently, participant outcomes were not a great concern to most plan sponsors; even now, a relatively few number of plan sponsors use income replacement as a measure of plan success. A recent survey conducted by PLANSPONSOR magazine showed just 3.5% of plan sponsors use projected retirement income as a metric to assess their plans. 1 Instead, the goal was to offer a plan with good investment choices, competitive fees, and a recordkeeping platform that would minimize the administrative burden on the employer.