Client Stories | November 26, 2019
When it comes to the retirement plan your organization will provide to its people, you need to get it right from day one. Our team will work with you to make sure your retirement plan design follows the latest best practices and will survive the long haul.
Today's economy demands that employers plan carefully and creatively to ensure that the design of their defined benefit (DB), defined contribution (DC) or hybrid plans, as well as other retirement income programs, will meet their goals and employees' needs over the long term.
Retirement plan design "fads" may come and go, but our consultants will never jump to conclusions about clients' needs. We approach a retirement plan design project — whether for DB, DC or hybrid plans — utilizing our proprietary plan design software and conduct a comprehensive process that will leave you with a top-notch plan.
Our team promises to provide the advice and expertise that's right for you, and not use a one-size-fits-all approach. However we do have a general framework for how we approach plan design, which includes:
This is just one example of how a client used our retirement plan design services to deliver a superior and sustainable plan to its people.
To promote higher deferrals in its 401(k) plan, a client was considering a change in their plan formula to encourage greater savings: Current plan design is 100 percent of the first four percent deferred; potential plan design is 50 percent of the first eight percent deferred.
To avoid any unintended consequences with the plan change, we suggested analyzing the DC plan population at a participant level. Looking at the overall plan statistics by employee type/group revealed relatively high averages across the board.
Through deeper data analytics of the employee group of engineers (identified by the client as a critical role to the organization), we observed that those under 35 were only deferring at or slightly above the 4% level to obtain the employer match.
We worked with the client to develop an engagement survey to better understand the reasons behind the low deferral rate. The results of our survey indicated that this cohort would not have the depth to increase their deferrals past the four percent due to existing student loan repayments and would consequently lose part of the employer match if the formula was changed. We suggested that, in conjunction with targeted communications, the client could supplement their retirement program with a student loan repayment plan.
Digging deeper into the population helped our client avoid making a change in the DC plan that would negatively affect a critical part of their employee population.
Our expertise at examining cohorts not typically reviewed in the client’s recordkeeper report provided an additional insight.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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