SEPTEMBER RETIREMENT PLAN NEWSLETTER
USE PLAN ANALYTICS TO EVALUATE YOUR RETIREMENT PLAN
MICHAEL VILJAK, SENIOR PLAN ADVISOR
Your retirement plan is a valuable resource for your employees and serves as a vehicle to attract and retain top talent. Ensuring plan success is crucial. Examining plan analytics can help evaluate its success.
Plan analytics you should explore:
- Median age, tenure and savings rates of plan participants
These analytics can be helpful to determine which age groups are not strongly participating and may be encouraged to do so via on-site meetings, focused mailings, and other communication and education.
- Participants not contributing sufficiently to receive all eligible employer match
Participants “leaving money on the table” can be studied to explain why contributing to the employer match maximum is so advantageous (e.g., with a 50 percent match, participants automatically earn 50 percent “return” on their contribution before any investment gains occur).
- Participants, by age, in each target date fund
Another demographic that can be helped by focused participant communications.
- Participants taking loans
It is important for plan fiduciaries to determine if the plan loan provision is being abused. This can result in significant asset leakage with participants and oversight concerns for plan fiduciaries.
- Loan default rates
Loan defaults also create problems for participants (taxation & penalties for premature distributions) and plan fiduciaries (loan defaults at 90 days arrear are a fiduciary breach).
- Dollar amounts of employee contributions by type and source
These analytics allow for a deep dive into the appropriateness of participant behavior potentially impacting plan menu design decisions, employee investment assistance, Roth utilization, TDF utilization and more.
Many factors impact the success of your plan. Studying your plan’s analytics helps you improve your plan and ensures your employees reach their retirement goals.
For assistance in analyzing your plan analytics, please contact your plan advisor.
About the Author, Michael Viljak
Michael Viljak joined RPAG in 2002 and has over 30 years of experience in the pension field, on both the wholesale and retail levels, focusing on 401(k) plans ever since their inception in 1981. Michael has an interest in fiduciary related topics and was part of the team that created RPAG’s proprietary Fiduciary Fitness Program. He also authors many of the firm’s newsletter articles, communication pieces and training modules.
HEALTH MODIFICATION CAN INCREASE RETIREMENT DOLLARS
A top concern for individuals nearing retirement is out-of-pocket healthcare costs. A recent study revealed that 74 percent (of 1,316 U.S. adults aged 50 or older) admit that one of their top fears is out-of-control healthcare costs, and 64 percent are terrified of what healthcare costs may do to their retirement plans (up from 57 percent in 2015).
Although fear is clearly real, there is something people can do to mitigate future healthcare costs. Personal care and healthy lifestyle choices can reduce healthcare costs and increase retirement dollars.
Many organizations are initiating wellness programs to promote healthy living among their employees. These programs focus on employee engagement and correcting the health epidemics facing Americans today. Eighty-seven percent of the world’s workers are disengaged. Additionally, sedentary office culture is being linked to lifestyle-related conditions such as diabetes and heart disease.
A case study conducted by HealthyCapital follows a typical 45-year-old male (John) diagnosed with high blood pressure. The study showed that John will spend $1,591 more annually out of pocket today versus a healthy person. With a few simple lifestyle adjustments (exercising, limiting alcohol intake, choosing healthy fats and limiting dietary salt) he could save an average of $3,285 annually over his lifetime, extend life expectancy by three years and reduce his pre-retirement (age 50-64) healthcare costs by $65,697. If he invested his annual savings into a typical retirement portfolio, John could generate an additional $100,348 for retirement by age 65.
Annual Out-Of-Pocket Healthcare Costs
Moving from an average lifestyle to well-managed living is a clear win – not only does the well-managed person feel better, they also have additional income in both pre-retirement and retirement.
Encouraging employees to live a well-managed life through wellness programs is not only a benefit for employees, but employers as well through reduction in medical-related employee absence and increased productivity and morale.
To learn about implementing a wellness program for your employees, please contact your plan advisor.
Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney.
I volunteer on the Board of Directors, so I don’t have liability right? – Can’t Touch This in Colorado
Liability is a complicated topic. If the plan is an ERISA plan, then state law is immaterial. Compensation has zero impact on whether an individual is a fiduciary. It is role and control that are the determinants. If you can exercise control or authority over the assets or management of the plan, you are a fiduciary. Ultimately the terms of the plan document will govern, but 90 percent of the time the organization is the named fiduciary or plan administrator. Because the board controls the organization, and thus can control the plan, the members thereof are typically fiduciaries.
If you sit on a committee and partake in fiduciary decisions, you have potential liability. I would recommend fiduciary liability insurance and specifically make sure it covers all committee members regardless of their employee status.
2 legit 2 quit,
About Joel Shapiro, JD, LLM
As a former practicing ERISA attorney Joel works to ensure that plan sponsors stay fully informed on all legislative and regulatory matters. Joel earned his Bachelor of Arts from Tufts University and his Juris Doctor from Washington College of Law at the American University.
PARTICIPANT CORNER: BACK TO SCHOOL
This month’s employee flyer encourages participants to ask questions and be educated about their retirement plan. Hang the memo in your lunchroom or distribute to employees along with their paychecks. Download the flyer from your Fiduciary Briefcase at fiduciarybriefcase.com. Please see the flyer below.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial (“Lutz”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Lutz is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Lutz’s current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Note: If you are a Lutz client, please remember to contact Lutz, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Lutz shall continue to rely on the accuracy of information that you have provided.
For more important disclosure information, click here.
RECENT LUTZ FINANCIAL POSTS
Value investing has been around for nearly a century, developing a devout group of followers over time. Some of the world’s most prominent investors employ a variation of the strategy, including Omaha’s…read more
This month’s newsletter includes insights on integrating your health savings into your retirement plan, Anthem settlements, information on HSA’s, and more…read more
This month’s newsletter contains insights on how to stay on top of your responsibilities and liabilities this summer and more…read more
13616 California Street, Suite 300
Omaha, NE 68154
747 N Burlington Avenue, Suite 401
Hastings, NE 68901
601 P Street, Suite 103
Lincoln, NE 68508
3320 James Road, Suite 100
Grand Island, NE 68803