Retirement services

Competition runs rampant in the
retirement services sector. Banks,
mutual fund companies and insurance companies are all vying for a slice
of 401(k) business.

However, not all retirement plan
providers offer the same level of commitment when it comes to making sure
employees are well-versed in eligible
plans.

After all, getting employees to participate involves more than merely letting
them know a plan is available. Education is an important component that
providers should bring to the table.

“Commitment to the education process
is key,” says Frank Ricchiuti, vice president and retirement plan consultant at
Comerica Bank. “A successful 401(k)
plan usually has good participation levels. Education is the driver to good participation.”

Smart Business spoke with Ricchiuti
about what functions a retirement plan
provider should be responsible for, how
often a retirement plan should be
reviewed and how service providers can
assist in employee education.

What are some key factors to consider
when looking for a retirement plan
provider?

The wish list is obvious: competitive
pricing, quality investments, efficient
service and great technology.
Unfortunately, this reads like every
providers’ marketing brochure. Some
plan sponsors know what they want;
many know they have a problem but don’t
know how to fix it; and some don’t know
what they don’t know. So the combination
of product marketing and not knowing
enough to cut through the spam makes it
very difficult for a plan sponsor to identify and evaluate those key factors.

What functions should a retirement plan
provider be responsible for?

The three main components are
record-keeping, administration and
investments.

The less obvious but equally important
issues are compliance oversight, ongoing
due diligence of the investments and the
level of commitment toward participant
education (preferably live meetings).
These services do not totally relieve the
plan sponsor of fiduciary obligations, but
they can certainly assist the employer to
make prudent decisions in selecting a
provider.

Once in place, how often should a retirement plan be reviewed?

This is a huge fiduciary liability issue,
and many plans have now established
investment policy statements for guidance in this regard. Investments move in
and out of favor, so they should be
reviewed at least annually.

Larger plans review their investments
quarterly, which may be the result of a
very specific investment policy. We also
believe that plans should have an administrative review to measure the overall
efficiency and competitiveness of the
program in a fast moving industry. We
find that many of our clients are not
being offered these reviews by current
service providers.

How can a company encourage its employees to participate in retirement plans?

This varies by employer. A high-tech
company or a law firm does not have the
same issues educating participants as a
manufacturing company has.

Employers concerned by productivity
and thin profitability margins are often
reluctant to make 401(k) plan enrollment meetings mandatory. We also see
successful 401(k) plans where enrollment meetings are presented in other
languages (e.g. Spanish) with enrollment
materials to match.

The new Pensions Protection Act
brings a potential solution to the problem — automatic enrollment and auto
deferral increase — options we expect
plan sponsors to consider in the future.

How should employees be educated about
retirement plans?

Ultimately, it is the fiduciary responsibility of the employer to provide that
information. The employer achieves this
by partnering with effective resources.

Those resources can be the actual service provider and/or a good broker or consultant who will focus on developing and
driving an effective ongoing action plan.
Multiple tools are available now with
more being developed all the time. We’re
seeing live workshops with worksheets
and pencils in hand (even PDAs); seminars to existing participants on different
investment-related topics; Webinars;
Internet-based education and financial
planning models; and user-friendly investment options that promote asset allocation through target retirement date funds.
The key is choosing the right team,
because a dedicated retirement plan consultant can make all the difference.

FRANK RICCHIUTI is vice president and retirement plan consultant at Comerica Bank. For a no-obligation assessment of
your current retirement plan, reach him at (714) 433-3235 or
[email protected].