Managing Employee Apprehension, Ambivalence and Angst:
Following are a few ways that companies can deal with the storm of uncertainty around their retirement plans:
Open the lines of communication. Organizations should ensure they are communicating with employees about company successes and challenges, especially if benefits reductions appear to be on the horizon. Uncertainty is often worse than bad news; while open handling of challenges can help motivate employees to work with leadership to help a company turn the corner.
Provide retirement education. Active retirement education programs are always critical to helping participants gain the most benefit from 401(k) plans, and they are even more essential in times of market decline. The focus of today’s programs should provide participants with tools to ride out volatile markets, including information about the importance of asset diversification and portfolio rebalancing, as well as the need to participate in programs that will form the core of their income in later years.
Review the investment vehicles in the plan. On at least a quarterly basis, plan providers should review the investment vehicles offered in their retirement programs to ensure that funds remain suitable for inclusion in the plan portfolio.
Educate fiduciaries on their responsibilities as well as the potential risks of their positions. Such education should occur at least annually and include not only named fiduciaries, but those who substantively participate in the administration or oversight of the plans.
Prepare for the finalization of new fee disclosure rules. In 2008, the Department of Labor published long-awaited proposed guidelines that would greatly increase disclosure requirements of underlying plan fee structures by plan sponsors. Preparation now could help plan sponsors comply quickly when the rules are finalized (expected in 2009.)
Review or develop your investment policy. Every plan sponsor should have an up-to-date investment policy that describes the thought-process of plan fiduciaries in selecting investment vehicles for inclusion in a plan portfolio, monitoring these vehicles on a regular basis and a process for the removal of sub-par funds.
Establish internal audit protocols. Every benefits administration function should conduct a quarterly internal audit to ensure that plan records are in order, that contributions are flowing in a timely and accurate manner, and that other required administrative actions are being taken. These audits should be formally documented.
Keep a vigilant eye on compliance activities. Compliance issues are potentially expensive and damaging for plan sponsors at any time, but scrutiny is increased even more at times of market volatility. Don’t be “penny wise” by curtailing resources for compliance. Make sure plan documents and summary plan descriptions are up-to-date and being disseminated correctly. Ensure that your plan is being operated in accordance with its terms. Finally, make sure you are on top of regulatory changes at all times.
As the financial markets continue to struggle toward a much hoped-for recovery, retirement plan sponsors must be more on their game than ever before. Employers have an obligation to support employees in providing information and wisely managing the plan choices available. Together we can weather the current stormy conditions through proactive practices and communication.
Author: Aimee Lowry, Practice Leader, Compensation and Benefits, Helios HR
To learn more, join us at our March 5 seminar, Managing a Company Retirement Plan in a Tough Market.
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Losses of 40.3 percent in the S&P Index alone kept U.S. investors riveted to financial news in 2008. 401(k) participants in companies across the country were among those most battered by market losses. Plan providers are seeing trends that will directly impact the workplace, including:| Issue 14 | February 2009 |
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Managing Employee Apprehension: Retirement Plans in Uncertain Times
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