Employers have an obligation to make sure they are doing the right things and making the right decisions for their employees, often times having to put the interests of their employees ahead of their own. Choosing a personalized retirement plan structure can benefit both employers and employees.

On top of managing day to day responsibilities, do third party administrators help employers craft a program that aligns with their goals and the goals of their employees?

Third party administrators help clients design their plan. Plan design includes details such as how long employees have to work before retirement eligibility, profit sharing options, etc. The ways in which these plans are designed are heavily based on the philosophy of each individual company. For example, if a company is in a very competitive industry where they are looking to attract high quality talent, TPAs are able to craft a well-designed plan to help them attract such talent. In addition, TPAs work to design plans that will help to retain current employees.

Can clients reach out for help after they have already adopted a plan if they realize that they didn’t receive what they thought they were going to?

 Smaller companies looking to set up a 401(k) program for their employees are typically looking for the easiest solution, one that is not burdensome. There may come a time where the company is growing rapidly, causing them to outgrow the provider that they are using. Companies during a growth phase like this tend to need true consultative advice on how to design their plan and identify changes that can be made. The value comes in when plans are already established and are able to then be revamped to meet the company’s current goals and needs. 

If an employer has a desire to put a large sum of their own money into their retirement plan, do the retirement plan rules and guidelines enable them to do so or limit their ability?

 Many employers want to maximize the potential of their own retirement. Working with a retirement plan consultant can help employers develop a strategy to do so. However, there are also limitations that the IRS imposes. The IRS does not want these plans to be set up for the sole purpose of the owners to reap the benefits themselves. Regulated testing is mandated to make sure that plans are nondiscriminatory. Third party administrators run models and tests to identify the maximum contribution level and ensure that plans are nondiscriminatory.

Are there identifiable characteristics of small to medium sized businesses that should steer them towards seeking out these types of services?

 As clients are growing, managing costs are often at the top of their minds, meaning not too many consultants should be involved. There comes a point where a retirement plan can actually pose a bigger risk for them. As the plan grows in size, the fiduciary risk also grows for the employer. At that point especially when the company reaches at least 100 employees, they should engage a consultant to help manage obligations and mitigate risk.

What innovation has there been, if any, in the last few years surrounding retirement plan design?

1.  Technology – Many record keepers have launched helpful tools to provide education and bring the topic of retirement to the forefront. In addition, mobile apps have made accessing accounts easier than ever.
2. Plan Design – A lot of employers have adopted automatic enrollment, which has become a popular feature. Historically most employees don’t opt in, making this innovative feature more impactful for employees.
3. Funds – The industry is seeing different types of investment funds being offered, for example, Environmental Social and Governance (ESG) funds.

What are some indicators to employers that it may be time to bring in a retirement plan consultant? 

1.  Feedback – Receiving feedback from employees that their plan fees are too high may mean that it is time to reassess.
2. Benchmarking – There is a fiduciary obligation that plans should be benchmarked on a periodic basis. A good rule of thumb is every three to five years. If the answers to the following questions are unclear, it may be time to look into benchmarking.
   1. “When was the last time that I took a deep dive into looking at my retirement plan?
   2. “Do I have the correct asset classes?
   3. “Do I have the correct fee structure?”
3. Employee Education – Desire to help employees be more educated related to:
   1. Diversification of investments
   2. Pre-tax vs. post-tax savings
   3. Dollar cost averaging

Additional Resources

•  The content for this article is based on a 2020 Retirement Insights Podcast. Click here to listen to the full episode.
• To learn more about CBIZ Retirement Plan Services please visit: www.cbiz.com/retirement

CBIZ Retirement Plan Services is a trade name under which certain subsidiaries of CBIZ, Inc. (NYSE Listed: CBZ) market investment advisory, investment management, third party administration, actuarial and other retirement plan services. Investment advisory and investment management services offered through CBIZ Investment Advisory Services, LLC, Registered Investment Adviser.  Investments, investment advisory and investment management services may also be offered through CBIZ Financial Solutions, Inc., Member FINRA, SIPC and Registered Investment Adviser, dba CBIZ Retirement Plan Advisory Services.  Third party administration, actuarial and other consulting services offered through CBIZ Benefits & Insurance Services, Inc.