NAPA 401(k) Summit Insider 2023

NAPA 401(k) SUMMIT

Insider 2023

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Editor-in-Chief Nevin E. Adams, JD nadams@usaretirement.org

Art Director Ethan Duran eduran@usaretirement.org

Director of Conference Sales Gwenn M. Marsh gmarsh@usaretirement.org

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I’m getting that question a lot these days—and with justification. After all, I officially “retired” on March 1, but I was at Summit—and clearly (still) very involved with Summit (and will be again in 2024) —none of which looks very much like that picture of the old(er) couple sitting on the beach that continues to “festoon” so many retirement education publications.

Yes, for all the talk about needing to “rebrand” retirement to better appeal to younger demographics, the reality is that even today’s retirees are likely—by choice or not – to continue to be active and involved. No, this is NOT my parents’ retirements—but solid financial preparations have allowed me the “luxury” of doing what I like to do, (largely) shed of the burden of administrative functions that come with full-time employment.

Among the things I like to do is this Summit Insider—a unique opportunity to tap into the collective wisdom and experience of advisors/home office personnel who participated in the recent (record-breaking) NAPA 401(k) Summit. Like the networking experience of the Summit itself, it’s a chance to see what is actually on the minds and driving forces of the nation’s leading advisors. Sometimes it’s a validation—sometimes a repudiation—but it’s always insightful, all the more so given this year’s (record-breaking) response to the Summit Insider questionnaire.

If you’ve stopped here long enough to read this far, let me offer you a preview of what’s on the following pages:

• There have been BIG shifts in sentiment regarding cryptocurrency (from positive to negative game changers) and state-run IRAs (ditto). Managed accounts continue to be viewed negatively.

• ESG remains the most over-hyped trend—but advisors are split as to whether it is a negative or positive game changer.

• Cost loomed large as the biggest hurdle for managed accounts, though not far ahead of “participants lack understanding of how they work”. Most see the future of these as being offered by the advisor’s firm.

• Plan sponsor interest in retirement income options really hasn’t changed, hovering somewhere between “minimal” and “occasional. Portability remains the dominant advisor concern with these solutions.

• Roughly two-thirds are now incorporating HSAs (health savings accounts) into financial wellness curriculums— though a third of those do so only if they consulted on the specific solution.

• Nearly a quarter (24%) say their team’s work/life balance is “better than ever.”

• “Attracting and retaining talent” alongside “scaling your practice” remained the big issues for advisor practices over the next 12 months. Perhaps somewhat ironically, succession and advisor consolidation were in the not important category.

• Among support from DC wholesalers, “plan tools and resources” slightly edged out “competitive info” as valued services.

Thanks once again to all who took the time to share those (your?) perspectives and insights on the pages that follow. Thanks for being part of the 2023 NAPA 401(k) Summit—and particularly to the sponsors of this year’s NAPA Summit Insider!

And please—like, share, and comment!

See you (all) in Nashville April 7-9 for the 2024 NAPA 401(k) Summit!

Nevin E. Adams, JD Editor-in-Chief nadams@usaretirement.org

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Who Are the Summit Insiders?

It was indeed a record-breaking Summit—and it should therefore come as no surprise to find that it also produced a record-breaking response to this year’s NAPA 401(k) Summit Insider—some 569 advisors and home office personnel responded.

As one might expect, it was a diverse group based on tenure, age, and target market(s).

Here’s a demographic snapshot:

With what size retirement plans do you TYPICALLY work/support?

How long have you been a retirement plan advisor/working with retirement plans?

Less than 5 years

5-10 years

10-15 years

15-20 years

More than 20 years

What is the total assets under advisement for which you are responsible?

Game Changers

Advisors work, live, struggle and thrive in a complicated environment, bounded in (and sometimes energized by) a variety of external boundaries, constraints, permissions, and incentives.

Once again, this year we asked the 2023 NAPA 401(k) Summit Insiders to weigh in on some of those key elements—and to assess whether they would be “game changers” (for good or ill), much ado about not that much— or if it was simply too soon to say.

As is often the case, on some things they were very much of like minds—others…well, not-so-much. We’ve organized those questions (and responses) by broad categories; Products, the Competitive Environment, Regulation/Legislation—and Setting the Stage with SECURE/SECURE 2.0, to offer some perspective on the prospective impact(s) of the most sweeping retirement legislation since the Pension Protection Act of 2006.

Products & Services

MEPs/PEPs

decline in the number in the “too soon to say” category—perhaps an acknowledgment that we’re another year past the SECURE Act’s creation of PEPs and/or an opportunity to see how the new-ish platforms will perform.

Overall, respondents remain optimistic at the prospects (and they still DO feel like prospects) for multiple employer plans, or the SECURE Act version—pooled employer plans, or PEPs. That said, there was a slight

There’s been some buzz recently about the notion of so-called “dynamic” QDIAs. While the idea itself isn’t exactly new—the advent represents a maturation of the thinking around the broad-based but somewhat simplistic glide path structures of a traditional target-date fund and the need/opportunity to shift that to a more customized managed account solution later in one’s career.

Of course, like any theory (be it sound or “squishy”) the “proof” is to be found in the pudding—and that doubtless accounts for the diversity of evaluations. Though the number finding it to be a negative game changer was minuscule.

Cryptocurrency in defined contribution plans

concerns about the fears expressed). After all, last year’s survey was fielded AFTER the Labor Department’s action, though before the bulk of the responses that followed. Not to mention the aforementioned market turmoil.

Rollovers

Since then, the Labor Department has both indicated its intention to appeal that result—and to provide a new fiduciary regulation that would update that five-part test. Regardless of those outcomes, there’s little doubt—as illustrated in these findings—that advisors view rollovers as a (very) positive game changer.

Managed Accounts

The “worm” has turned on this topic—more than four in ten (42%) viewed this as a positive game changer in last year’s Summit Insider, and this year – albeit in the aftermath of considerable controversy and market volatility—that sentiment has completely reversed.

Intervening events may have muted (if not mooted) the concerns expressed by the Labor Department once upon a time (not to mention the

Defined contribution plans held some $9.3 trillion at year-end 2022, while IRAs held $11.5 trillion, according to the Investment Company Institute. It’s widely stated that much of the latter originated in the former, and that seems likely to continue in the years ahead as workers currently invested in 401(k)s and 403(b)s head into retirement.

Of course, in the months since the last Summit Insider, the Labor Department’s issuance of FAQs clarifying the application of PTE 2020-02 triggered litigation by firms representing annuity sellers that challenged those FAQs as creating law beyond the regulation’s provisions. More specifically challenging the notion that the transaction regarding the rollover could be the first in a relationship that would satisfy the provisions of the five-part test that has long constituted the boundaries of a fiduciary relationship.

This was one of last year’s most surprising findings—but the 56% of this year’s respondents who saw Managed Accounts as a negative game changer is actually more than the 45% in last year’s Summit Insider. And those who saw it as a positive game changer was only a fourth of the 8% who ranked it as such a year ago. Incredibly, in 2021, 41% saw these as a positive game changer. So, what’s happened?

Over the past couple of years, managed accounts (re)emerged on the scene with some enthusiasm, at least in the advisor community. These options purport to provide a more customized solution than your traditional target-date fund and one that also—at least potentially—brings to the fore the insights and perspective of the plan advisor.

That said, all managed accounts are (literally) not created equal—and some, arguably, amount to little more than expensive target-date funds—a point that has been made in several litigation filings of late—and perhaps that accounts for the surprisingly negative read on this option—a remarkable turnaround from the last Insider, where 41% saw these as a POSITIVE game changer!

The EnvironmentCompetitive

State-Run IRAs

than that found in private sector plans—and that even those who are successfully defaulted into the state-run version are foregoing the employer match that they might receive in a private sector alternative, such as a 401(k).

Proposed government “takeover” of 401(k)s

Recordkeeper Consolidation

There has been a sea change of sentiment regarding these programs from a year ago—with the vast majority of respondents seeing them as a negative game changer. A year ago a plurality (35%) actually saw them as a positive game changer, perhaps because there has been evidence—both anecdotal and from surveys conducted by Pew Trusts— that the mandate behind these programs has been good for private retirement plan start-ups. Of course, it might also be an acknowledgment that the opt-out rates from these programs are significantly higher

This proposal—introduced late last year as the Retirement Savings for Americans Act on a bipartisan, bicameral basis—has the potential to be a real game changer, though Summit Insiders don’t seem phased by the possibility. Perhaps they see it as “drumming up business” the way that the state-run IRAs seem to (though, in fairness, those weren’t favorably viewed by this audience), or perhaps they view the potential for what would amount to federally mandated savings as being good for coverage/retirement savings.

That it might, of course – but, and as was mentioned during the NAPA 401(k) Summit, this doesn’t look to be a very good way to go about it.

While the pace has slowed in recent months, consolidation in the ranks of the nation’s recordkeepers seems to “erupt” with a certain vigorous passion about once every ten years or so. A year ago, we were very much in the “throes” of one of those cycles— but despite that, and the tumult it sometimes creates for plan sponsors, Summit Insiders were relatively ambivalent then (46% viewed it as “much ado about not much”), and they’re even more so this year, with just under six in 10 rating it as such.

That said, the notion that it might be a positive game changer was a distinct minority opinion this year— just 8% versus 21% a year ago, where Summit Insiders perhaps viewed it as having the opportunity for plans (and perhaps advisors) to “trade up” from recordkeepers struggling to maintain parity.

Social Security Reform/ Funding

Excessive Fee Litigation

Regulation & Legislation

ESG Regulation

While the survey simply stated Social Security Reform/Funding, one might wonder exactly what that means. With 85% (second highest in the survey with that rating) seeing it as a positive game changer, it seems logical to infer that respondents saw this as politicians solving the much reported on projected shortfall in funding a decade or so from now. Of course, “reform” sometimes means reductions in benefits, or increases in taxes (both seem likely at some point), and there might be some less than positive response to those measures—but perhaps that accounts for the one-in-ten aligned with “too soon to say.”

Regardless, it’s clear to most that something needs to be done. And our Summit Insiders seem to feel good about those prospects, as well as the need.

The first set of excessive fee suits was filed by Schlichter Bogard & Denton in 2006. Since then, we’ve seen that “genre” extend to university 403(b) plans, challenge the alleged pursuit of chasing low fees and ignoring performance, question the use of managed accounts, and challenge the concept of participant data as a plan asset. Oh, and launched a new generation of firms in the plaintiffs’ bar focused on these targets, even though some appear more motivated by the prospect of quick insurance-driven settlements than targeting actual imprudence.

But this year again—and despite that long history—a plurality of Summit Insiders say it is (still) “too soon to say” how this will impact things is perhaps an indication that there may be both positive and negative aspects arising from this. Indeed, that nearly as many once again rate it as a POSITIVE game changer (whereas few view it negatively) suggests that a broader focus on fees and efficient plan designs can be a good thing, even if the cost in time and document production in some cases serves only to enrich the plaintiffs’ bar.

Elsewhere in this report, there’s reference—consistent over the past several years among Summit Insiders—that ESG (environmental, social & governance-focused investing)—is the most “overhyped” trend. With that in mind, this finding—a near-even split between those who view it as either a positive game changer or “much ado about not much”—seems contradictory. However, a year ago – while still waiting for the Biden Administration’s final regulation— that was pretty much the sentiment as well.

Perhaps now with the final regulation having apparently “settled” in less controversial positioning than the proposal, those sentiments have been validated.

Traditionally retirement plan advisors haven’t been much concerned with healthcare—even though it’s a dominant concern of most employers (and workers). But under the auspices of the innocuously titled Consolidated Appropriations Act of 2021, that could change. Indeed, some have labeled that legislation the most significant compliance challenge employers have faced since the Affordable Care Act.

While there is a lot to unpack in that legislation, certain provisions became effective only just this year – meaning it’s only just beginning to surface on employers’ radar screens. Failing to comply with the requirements of the CAA leaves employers at risk of fines and classaction lawsuits. But most employers are still in the dark, believe their broker or TPA will handle compliance on their behalf, or that it’s simply “no big deal.”

The bottom line is that the fiduciary requirements that have long applied to retirement plans are going to be applied to health care plans—and that’s going to mean

a whole new level of focus on the reasonableness of fees and services under those programs. It’s also likely to provide a new, enormous target for litigation—and, as evidenced in the findings above—an opportunity for advisors.

Setting the Stage with SECURE/ SECURE 2.0

SECURE Act’s Retirement Income Safe Harbor

The view of Summit Insiders on the impact here has varied since that introduction; in 2021, just over half of respondents viewed this particular element as a positive game changer, and in 2022 nearly two-thirds did. And this year—well, the sentiment has slipped back to just under half, with another quarter (23%) placing it in the too-soon-to-say category.

That’s not to say it’s not generally viewed in a positive light. After all, the reality of this provision emerged late in 2019 (when most thought it had no chance), and then… COVID. Arguably, it remains early days in terms of a real opportunity to see what impact this might have on the acceptance of retirement income options—and what opportunities it might represent for retirement plan advisors.

Printing/Showing Lifetime Income Amounts on Participant Statements

One of three elements in the original SECURE Act designed to shift participant focus from accumulation to decumulation, this particular element (the other two being the reporting of a monthly lifetime income amount on participant statements and allowing for the portability of “in plan” lifetime income benefits) was intended to alleviate the long-standing concerns plan fiduciaries have had regarding their selection of a lifetime income provider whose responsibilities might entail on-going services two or three (or even four) decades past the time of their selection.

We’ve already noted the three lifetime income enhancements in the SECURE Act, but unlike the safe harbor, some version of this approach has already been appearing on the participant statements. Its intention is, of course, to help participants better

Summer 2023

appreciate what kind of monthly income their retirement savings accumulation will produce by way of helping them focus on retirement income amounts, if not solutions. In that sense, one can understand that a plurality of Summit Insiders view this as a positive game changer (though a year ago, two-thirds did)—but also why just as many thought it was “too soon to say.”

Student Loan Repayment Matching (SECURE 2.0)

It’s not yet clear just how many employers have been able to put these measures in place, but from the moment word came out about Abbot Lab’s private letter ruling from the IRS that provided a “green light” for the organization to provide non-elective contributions as a match for student loan repayments back in 2018, HR managers across the nation have been trying to see how/if a similar approach might apply to make it easier for those burdened with student loan debt to more effectively benefit from workplace retirement plan savings opportunities.

Indeed, the sheer depth and breadth of the impact that student

loan debt is said to have on retirement plan participation has been a wake-up call of sorts—and the prospects for this kind of solution still look to be very well-received by advisors, with the positive game changer evaluation nearly identical to that In last year’s Summit Insider.

Legislation (SECURE 2.0) to Expand Emergency Savings Accounts

This is another outcome that has, since last year’s Insider, crystalized into actual legislation (SECURE 2.0), and this one specifically the option (beginning in 2024) for plan sponsors to establish “Pension Linked Emergency Savings Accounts” as part of a defined contribution plan (401(k) or 403(b)). Only non-highly compensated employees may contribute to the account, though employers MAY auto-enroll such individuals in an EAS up to 3% of their compensation, and the EAS value cannot exceed $2,500[iv] (indexed for inflation).

All employee contributions to this emergency savings account MUST be made on an after-tax basis—and each month, participants may take withdrawals from the account (just to further complicate administration, the first four withdrawals for a year cannot be subject to distribution fees).

Now there have been concerns that these might evolve into some form of “Christmas Club” account, and the tracking (not to mention the possible recrediting of amounts withdrawn (and matched) is surely a recordkeeping nightmare. Those issues—and perhaps concerns about what expanding pre-retirement access to retirement money might do—support the just over half of respondents that viewed this option as a negative game changer.

Increasing the Small Employer Plan Start-Up Credit to Cover 100% of the Cost of Operating a Plan for the First Three Years (SECURE 2.0)

New Tax Credit to Encourage Small Employers to Make Direct Contributions, Offsetting $1,000 of These Employer Contributions for Each Participating Employee

Requiring New Plans

Established After SECURE 2.0

Enactment to Offer Automatic

Enrollment, Effective in 2025

When we posed this option last year, it was still just “aspirational”— today it is a reality. Not surprisingly, of all the categories presented in this part of the survey, it drew the strongest response as a positive game changer. Indeed, it’s higher than the 85% who viewed it that way a year ago.

In some regards, it remains too soon to know if the credit will transform the traditional reluctance of smaller employers to establish a plan—but there’s certainly room for (a lot) of optimism.

There’s a one-two “punch” of small employer incentives in SECURE 2.0— the tax credits that offset the cost of operating/administering a plan for the first three years (see above), and this one—that encourages employers not just to establish the plan, but to contribute to it on behalf of workers. Not surprising that it, like the tax credit above, drew high support from our Summit Insiders. Indeed, coupled with the hoped-for surge in new plan formation, it could really be a game changer for retirement security.

The “vegetables” that come with the “dessert” of the tax incentives for setting up and contributing to a new plan is a requirement that those new plans offer automatic enrollment, beginning in 2025. Now, arguably there’s a definite trend toward doing so industry-wide, but that trend has been muted among smaller employers, and there’s a sense— and the survey responses echo that above—that the requirement might take some of the wind out of the sails (or would it be sales?) of new plan formation. That uncertainty no doubt accounts for the high response to the “too soon to say” group—not to mention the assessment as a “negative” game changer. Time will tell. SI

Practice Propellants or Problems

The success – or lack thereof – of any advisory practice is often driven by internal and external factors to the individual practice. While every practice is unique—both in terms of its principals and its principles—we asked Summit Insiders to weigh in on what they thought would be the big issues for their practice(s) over the next 12 months. Specifically, how they saw the impact of these factors, ranging from VERY important to not important at all.

Here’s what they said:

Most Important

While every item is not as critical to every advisor, these five criteria stood out as being considered VERY important to a majority/near majority of the respondents and a significant majority if you combine those who ranked the aspect as either very important or important. It’s also notable just how few respondents considered these factors to be not important. Mostly these have to do with considerations INSIDE the advisor organization—the one notable exception, once again as it was last year, being cybersecurity. Mental health in their workplace seems to have increased in importance since last year’s Insider

Scaling Your Practice Attracting & Retaining Talent

Very important Important

Somewhat important

Not important

Not Important (to Most)

We noted above that most of the VERY important factors were internal to the advisor organizations themselves. Ironically, so are most of the factors that were deemed not important by significant minorities of respondents. That said, the gap between “not important” and “very” important wasn’t always large, notably with regard to “Succession”—though that was the only one in these categories where “very important” was not the least cited rating.

Important—But Not Most Important (to Most)

The elements in this category were pretty consistently ranked as important but not VERY important. Indeed, in this grouping, it was not unusual for the “very” label to be applied by just a small minority of respondents. Most of these were external factors—arguably external factors that could impact business growth and/or profitability—which means, of course, that their importance could vary over time—or environment.

Regardless, they are—and should be—on the radar screens of all advisors.

Very important Important

Somewhat important Not important

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“Managed” Account

According to Cerulli Associates U.S.Managed Accounts 2022: The Future of Personalized

Portfolios, assets in managed accounts programs grew nearly 24% in 2021, reaching a high of $10.7 trillion.

Indeed, these structures have proliferated in recent years, doubtless driven in no small part by the development/adoption of these solutions by advisory firms. However, many advisors continue to see these as little more than “expensive target-date funds.”

In this year’s Summit Insider, we asked two specific questions regarding both the future of and potential for managed accounts:

What is the MOST significant hurdle you see for managed accounts?

While cost was a dominant consideration, the second and third-most cited aspects had to deal with participant understanding and behaviors—two items that arguably feed on each other, the former standing as an impediment to the latter.

So, how do Summit Insiders see things progressing in the future? Well, it’s a bit of a mixed bag, though the advisory firms themselves seem to have the upper hand.

How do you envision the future of managed accounts?

Cost

Participants lack understanding of how they work

Not many participants use the service Added fiduciary oversight of managed account provider Target-date or Risk-based funds are sufficient

Offered by the Advisor’s firm

Offered jointly by a group of asset managers with no proprietary requirements

Offered by the Plan’s Recordkeeper

Offered by an independent firm

Income “Oriented”

It’s widely said that 10,000 Boomers are heading into retirement every day—and survey after survey indicates that they are interested in some kind of “solution” to provide a dependable stream of income.

There remains a traditional reluctance to bring those solutions “inside” the workplace retirement plan— ostensibly due to fiduciary, cost, and product complexity concerns, though the former, and perhaps at least some of the latter, has arguably been at least somewhat—and purposefully—mitigated by provisions in the SECURE Act. However, the focus has undoubtedly been a bit sidelined by workplace concerns related to the COVID-19 pandemic. That said, SECURE 2.0’s expansion on QLACs (Qualified Longevity Annuity Contracts) has been seen as additional encouragement for these solutions.

As a series of new offerings continue to come to market, while advisory firms are snapping up wealth management practices, and target-date fund glidepaths are increasingly found to be crafted with a “through” rather than a “to” retirement date focus—we asked our Summit “Insiders” whether the perspective of their plan sponsor clients had shifted at all.

How would you rate your plan sponsor clients’ level of interest in in-plan retirement income products?

Generally speaking, how does that level of plan sponsor interest in in-plan retirement income compare with two years ago?

It hasn’t really changed

It’s higher/more

It’s a mixed bag—higher for some, lower for others, unchanged for still others

All in all, the overall interest levels were pretty much in line with the readings in the 2022 Summit Insider, with slight increases in the minimal/occasional categories—with a big drop in the non-existent grouping (21% up from 14% in last year’s survey), and in the high group (from 7% to 2%).

Favored Factors

Regardless of plan sponsor sentiment, there’s also a pretty consistent understanding that advisors will wind up playing an essential role in overcoming the traditional objections to these solutions—and so we asked Summit Insiders what, in considering a retirement income solution, factors would be most influential/compelling for YOU to consider recommending the option to your plan sponsor clients.

Respondents were able to choose multiple categories – and as you can see below, portability was, far and away, the top consideration:

There are, of course, a number of different solutions currently available and we asked respondents which retirement income option(s) they thought plan sponsors should consider or offer to participants—of course, more than one option was allowed:

“Over” Done?

When it comes to overhyped trends, ESG investments once again (as it has for the prior three years) not only topped the list but once again drew nearly THREE times as much support for that categorization (last year it was only twice as supported) as the No. 2— which was, again cryptocurrency. MEPs/PEPs crept up to the No. 3 slot while actually declining in overall ranking from its placement the past two years. Robo-advice also slipped

in “intensity” but still held on to tie for the No. 3 slot.

Overall, there’s a palpable sense that all the “fuss” about ESG—from the controversial first proposal by the Trump Administration all the way to the (arguably equally controversial) first proposal by the Biden Administration to the final version (which seems pretty close in purpose, if not language to the final Trump Administration version) and which has now drawn the ire (and litigation

focus) of half the nation’s Attorneys’ Generals—has served to fuel the sense that this “trend” is overblown. Time will tell if that sense quiets.

That said, what may today be viewed as passe can just as easily reemerge as an opportunity—or a threat. Consider the relatively low ranking for topics like fee compression and consolidation— trends that seem far from “over.” And items like “litigation” surely aren’t likely to be discounted any time soon.

The most over-hyped industry trend(s)

What do you find to be the MOST over-hyped “trend” in the industry?

Pooled Plan Perspectives

One of the most-anticipated provisions in the SECURE Act was the advent of a new brand of multiple employer plan, now labeled a Pooled Employer Plan or PEP.

Created by the SECURE Act in 2019 and first approved for use in 2021, a PEP is a 401(k) plan allowing unrelated businesses to participate in one plan managed by a pooled plan provider (PPP). In fact, a recent survey found that more than half of smaller employers surveyed by the Secure Retirement Institute (SRI) that are considering a DC plan are interested in learning more about PEPs—regardless of whether they have a retirement plan currently in place. At that time, SRI found that employers with 10–99 employees were significantly more interested in learning more about PEPs, especially the largest (small) employers (those with 50–99 employees).

That said, and as is often the case, those in favor of Pooled Employer Plans seemed keen and enthusiastic about the current state and their prospects. And while there has certainly been a lot of PEP creation, the take-up— undoubtedly somewhat hampered by the onset of COVID-19 – has likely been less than hoped overall.

That said – and perhaps indicative of the slow start - we asked Summit Insiders which of the following pooled plan solutions are you currently using, if any—and allowed for more than one response:

Education Precedents

Financial wellness remains a hot topic of interest and enthusiasm—and one of the Summit Insider’s mostoverhyped topics. That apparent inconsistency is explainable by the vagueness/breadth of services and support that can be found (or not) under that heading. Regardless, there’s little question that the concept and presumed impact of financial wellness can be profound. At the same time, despite integrating physical (and mental) health and financial wealth, advisors have long eschewed a specific healthcare focus as part of these programs. So, as part of this year’s Summit Insider, we asked:

Balance of “Nurture”

Much is made of the importance of work/life “balance.” However, there seems little consensus on exactly what that “should” be, just a general sense that it might shift from time to time and that there does, in fact, need to be some proportionality to each to maintain a healthy physical and mental equilibrium.

MetLife’s 21st annual U.S. Employee Benefit Trends Study found that nearly half of employees (42%) don’t feel cared for by their employers, and when employees don’t feel cared for at work, their well-being, happiness, and overall satisfaction take a hit.

In fact, that report said that not only were those employees 65% less likely to feel a sense of belonging at work and 72% less likely to feel valued by their employers—it said only 45% are engaged, 58% are productive, and 54% are loyal (compared with the 87%, 90%, and 89%, respectively, who do feel valued).

That said, the strains of the COVID-19 pandemic—on both home and work fronts—linger, more in some places and for some folks than others, but still…

We asked Summit Insiders for their take on the temperature in their team, and… well, it seems things are pretty much back to “normal”—and for a notable minority, better than ever!

How is your team’s work/life balance right now?

As for the Summit Insiders themselves—well, the news is a bit of a mixed bag, but still noteworthy that most are in the normal to better than ever camp.

How is YOUR work/life balance right now?

Partner “Shifts”—TPAs & DC Wholesalers

It’s been well established in previous Summit Insider reports that service is the dominant reason for hiring (and terminating) a relationship with a third-party administrator, a.k.a TPA.

Defined contribution wholesalers—or as our annual accolade acknowledging the best of this “breed” calls them, Advisor Allies—have long been a vital support partner for the nation’s retirement plan advisors.

That said, and from a wide array of services they might (and do) provide, we asked Summit Insiders which they valued (most), and while it was a near tie between No. 1 and No. 2, there was clearly interest in all:

Third-Party Administrators

Another key advisor partner is the third-party administrator, or TPA (remember that a recordkeeper is also a TPA). Now, it has been wellestablished in previous Summit Insider reports that service is the dominant reason for hiring (and terminating) a relationship with a third-party administrator, a.k.a TPA. We asked Summit Insiders to provide some context for what “service” includes.

It’s been well-established in previous Summit Insider reports that service is the dominant reason for hiring (and terminating) a relationship with a third-party administrator (TPA)—how would you define that in this context—and we asked that respondents check all that apply.

Those categories notwithstanding, verbatim comments from Summit Insiders repeatedly commented that while those were the “whats,”—the “how” was really the most critical element.

In fact, timely responses to calls/ emails—came up a LOT. As one reader noted, “They can be great at everything on the list, but if they are not responsive, they are useless.”

Here are some other comments:

Within the last 2-3 years, to my team, “service” has almost exclusively come to mean 2 things: 1) responsiveness or lack thereof, 2) the functions that make up the TPA’s offering to a client. Responsiveness has diminished, and the number of functions performed have been reduced.

With TPA Consolidation the service aspect has gone way down....we are now looking at going completely bundled with all plans because of this

While critical, the above are tasks. The key element is the timely and responsive communications with the plan sponsor to questions and in assisting the plan sponsor with their duties. The TPA in the micro and small plan market is an extension of HR and part of the team they rely on.

Plan tools and resources (such as benchmarking tools, industry reports, fund scoring software, fiduciary best practices)

Competitive info, best practices of other advisors, hearing what’s working and what isn’t

Thought leadership on industry trends, legislative changes, other industry data Specific investment performance updates and market/fund commentary

TPAs focus on compliance work not relationship building which makes them vulnerable. Too often being the police and not the partner

TPA communication and soft skills are underrated. When working with plan sponsors who are worried about making a correction, TPAs

LOVE WORKING WITH TPAS -

WORKLOAD

PLANS!

are incredibly valuable. However, sometimes (say on the first phone call to explore a corrections issue) plan sponsors need to feel that they’re supported and that they’ll be (relatively) ok before getting into the technical details. If that isn’t successfully communicated, the problem can end up looming even larger in the plan sponsor’s eyes after the call.

Thorough knowledge and understanding of the details that go beyond mine; a true plan design/ compliance consultant - not just a “tester”...there’s a serious shortage of capable TPAs out there.

They are a dying breed. With RK consolidation, same with TPAs but now it’s easier to go bundled and have a cohesive look/feel to the plan.

The above mean less...for me, when TPA’s comment they are too busy because they are in testing season or they have other deadlines to meet it is a complete turn off. I do not like the bundled providers b/c they do not allow personalization and make clients believe they are unimportant. TPA’s who put off a client request to run projections using data for a match etc. is unacceptable. Clients pay for personal touch. Some TPA’s have forgotten that clients can bundle if there is no better service.

Obviously all are important but I think the primary reason to utilize a TPA is the compensation definition validation--and as a part of that--the

ability to best calculate new comp/SS integrated, etc. type of tests to assist with P/S contributions for HCE’s/ owners.

Most record keepers are bundling these services putting the TPAs out. Unless there are multiple plans at the sponsor or a very unique plan, the TPA services and fees are redundant.

Keeping the same contact at the TPA for all my plans versus feeling like it’s someone different everytime I call. It’s all about the relationship at this point.

Interesting question- historically service from a TPA has been acclaimed, but with fee pressure and turnover of TPA staff, the quality of consultation and knowledge has greatly decreased. Many TPA firms have not been able to pay growing costs of business, including cybersecurity technology, and many knowledgeable owners have retired and sold businesses. This world is changing.

I think the biggest issue is fee compression along with rising salaries/costs have put TPAs (and many of us) in a bind with service. Everyone is doing more with the same amount of time they have always had.

I see a trend away from bundled services back to a recordkeeper/ TPA service model due to lack of service and accessibility by the recordkeepers.

I have quite a few small business owners and the level of assistance they receive from their TPA partner is so important. Had an issue surface while I was at the Summit and my TPA partner stepped in immediately with the quick response. Some are definitely better than others!

I expect any TPA partner to deliver all of the above. Termination for service is due to inability to return phone calls or have “urgency” to deliver quality work. OR to be accountable for mistakes. Proper communication for who does what can also be an issue, as advisor we assume that we are primary relationship manager with client.

I expect all those to be done, I want weekly updates on pending plans and challenges before they become challenges.

Communications with the TPA has been an issue for a couple of our plan sponsors and for us.

All of the above responses are basic “must-haves” for a TPA. However, responsiveness to advisors and sponsors is of key importance. I presume the TPA will do their job (see above), and I don’t care how great you are if I can’t get the info, I need from you when I need it.

TPAs are often hired for a more personalized service/hand holding, so they need to be willing to service this way. SI

“

GREATLY HELPS REDUCE THE

FOR SMALLER OR MORE COMPLEX

”

If I’d Only Known…

What would the person you are today tell the person you were when you got into the advisor business?

As parents, colleagues, and human beings, we all have experiences that we like to share with those who haven’t yet had the benefit of that experience. We asked Summit Insiders to take that inclination one step further—and asked what the person they were today would tell the person they were when they first entered the advisor business.

Here’s a sampling:

On the work itself…

It’s going to be a grind, but it’s worth it.

Be patient. The sales cycle can be quite lengthy.

Try to find a firm with more women advisors. Mansplaining is real and exhausting, and women collaborate better.

It’s about the people you help, not about you.

Stick with it. The journey, and the early grind is worth it.

Be persistent with marketing. It is a great way to help people while having a great balance of work/ personal time.

Spend more time marketing and get staff to do the other stuff.

Enter this industry as a servant. And be an employee retention specialist.

Hang on, it’s going to be a wild ride. And make sure your employers properly hold your licenses, so you don’t have to retest!

Build a process now so you aren’t rebuilding it from scratch over the years. Better to evolve than restart.

Keep to your personal passion. Don’t get bullied into the sale.

Stay curious and be willing to evolve and grow based on plan sponsors changing needs.

Balance is important; you will swing from the technical end to the personal end through your career but eventually settle in the middle to be successful.

Please remember that our language is unique and assuming participants understand us is because they won’t ask the questions they have. Most employees really do not have a deep knowledge in saving in 401k plans.

Be 100% comfortable in your practice - it’s an evolution that takes time to grow the right way!

Get into the weeds, spend more time understanding the audit process and legal framework governing retirement plans to help your clients better understand and manage fiduciary liability.

Keep your focus on the outcome and follow the process.

Be thoughtful and kind. Remember who we work for, the participants only. Not the recordkeepers, not the asset managers but our duty to serve in the best interest of those we serve. Don’t be afraid to stand up and make a difference. It’s hard work but it pays off.

On your practice(s)…

GO after the bigger plans.

It’s better than being a recordkeeper or TPA.

However hard you think you’re working; someone is working harder.”

Don’t try to be the first one to answer, be the one who answers correctly.

Work smarter, not harder. Don’t be afraid to turn away a poor fit.

Continue to focus on the “long game” as this is a “get rich slow” business (which is significantly better than most businesses which are “get rich never”!)

Work hard to learn as much as you can about our business. Throw the clock away because this is not a traditional 8 hour/5 day per week career. You work when you need

to and balance it by taking time off when needed.

Focus on the future look of your practice and structure practice accordingly. Find a mentor relationship.

Assets under management is everything.

Find a great mentor, and make sure you are paid a decent salary plus. Don’t work solely as an Assets Under Management pay structure.

Educate yourself as much as possible in all products even if it’s not available to participants.

Never sign non-compete agreements :)

You have the capabilities, knowledge, and tools to significant impact many Americans to retire with dignity and the ability to enjoy the rest of their lives.

“Learn: from a quality, ethical, selfless experienced advisor; how to communicate with others; how to convey the differentiating value you bring; how to care more for others than making money; what values you live by and how they motivate you; how to find your voice.

Exercise appreciation and gratitude every day.”

Don’t get caught up in trendy products. Bear markets don’t last that long. Active investments only bring value in short-term markets.

There are a lot of big egos around that can hamper scale and efficiency.

Get designations early in your career.

Always stay focused on the participants.

Plan your days to include marketing and business development each and every day.

Spend time dedicated to bringing in new business - block off your calendar. You will get consumed with servicing your clients and you can’t let that deter you from growing the business.

The most important focus is always good service.

Relationships matter most.

Find a mentor and learn, then start your own practice.

The more experience you have, the easier it will get. Stay the course.

It is a great ride, and no two days are the same and be careful what you wish for back to back bipartisan legislation has intensified the workload.

Build a team sooner.

Surround yourself with only rockstar teammates and don’t cut corners on compensation with great employees.

Hire staff and don’t try to do it all yourself like I did.

You can do this! It’s not nearly as scary as it seems, and it is profoundly satisfying to help people understand their finances and reach their goals.

Focus on holistic services and knowledge to assist client and not so much on cost/revenue.

“DON’T BE AFRAID TO MOVE FORWARD WHEN YOU DON’T KNOW EVERYTHING.”

It never gets easy. You have to continue to improve on a daily basis. Focus more on bringing clients through the thought process.

Hire help sooner.

Do the things that bring you joy and set a per client minimum fee.

Create written contracts.

Don’t undercut your fee to win. Explain how you make a living. “

It’s a marathon, not a sprint. Know the value of your time and knowledge and recognize unhealthy and unprofitable relationships. Don’t trust your memory, trust notes that are entered as/right after sponsor/participant discussions. Develop clear follow up routines.

I’m not sure I want to archive that in writing....

Be your own boss sooner! On the business…

The industry will always be changing.

The business changes often. You need to invest in keeping up.

Be comfortable not knowing everything about the industry. Nobody does, everyone is always learning.

This is a fun ride with all the changes. SO much opportunity...it’s just about getting the attention of the right person at the right time! Yes, it’s a TON of work most days, but I’m passionate and hardly ever approach a day with dread.

On that work/life balance…

Don’t work so hard.

Travel more

Find a way to have better work/life balance.

Keep your head down and good things will come in time. Listen to the plan sponsor. Fix their issues. Ignore most advisors, it’s just noise.

This job will change your life. Even though you know nothing about this industry now, or what a 401k even is, you are about to learn the most you ever have about ANYTHING and have the most exciting time doing it!

“Don’t sacrifice family for the growth of the business! At the end of the day the clients respect a “”family man”” and if they don’t...we don’t want them as clients anyway!

Be open honest and fully transparent about your personal life and family... allows clients to view you more as a friend and not just a financial advisor. I train my team to be a life advisor that specializes in finance...we want our clients to ask us questions about anything and everything!”

Be patient. Be yourself. Learn to say no. Be intentional about your schedule every day. Remember who your clients belong to and who you are representing.

On a (more) personal note…

Be yourself and have more fun at work.

You have to push yourself to grow. “The way it has always been” is the

way to make sure your practice isn’t successful.

Go after more plans earlier as you know more than 99% of the people that you speak with.

Don’t take business decisions so personally. I take so much pride in my work that I get attached to my clients and when they leave, I’ve often taken it very personally. A CPA I used to work with once told me that this business would be great if it weren’t for the clients. I’ve been able to put things in perspective better as I’ve gotten older.

Be exceptional at one or two things and not a general practitioner of many things.

“Be a goldfish and a sponge. Forget the bad, soak up all the good.

Keep up the good work. Things will work out if you continue to strive for positivity.

Stick it out and stay true to your values, not the firms you are working for.

Boldly be your unique self. Do the work. Treat everyone with love, respect, and honor.

Save more and prepare for more frequent crises.

Be confident in your expertise. Develop relationships deeply.

Trust yourself. Speak out with your opinion as you know just as much as the person sitting next to you. SI

“PRIORITIZE NETWORKING AND CULTIVATE RELATIONSHIPS. BUILD OUT REFERRAL SOURCES.”

“Under” Standings

What do you wish more plan sponsors understood (better)?

That we are more than just an investment advisor. We are retirement plan advisors.

The long-term costs to a company if participants can’t retire or retire on time.

That it’s in the plan sponsor’s best interest to assist employees in being able to retire at a reasonable age, rather than experience lower productivity from older employees not having the ability to retire due to inadequate savings.

Generally speaking, it’s one of those things that come attached to other responsibilities—HR, or sometimes finance—and often without any background, education, or instruction—including any mention of the reality that there is personal liability for the decisions they make on behalf of the plan participants and beneficiaries.

That said, there are times when those who support them struggle to get their attention and obtain their understanding and appreciation for what goes into that support.

As one respondent noted: “ The clients that I have to gently scare to attend a meeting are the nuts to crack.”

But another noted, “I am fortunate to have a client base that is very willing to learn.”

This is why, once again, we gave the Summit Insiders “voice” to articulate what they wished more plan sponsors understood (better), or more specifically, that…

Advisors are different

The difference between specialist Advisors and two plan Tony’s.

The difference between retirement plan practitioners vs general financial services reps.

The importance of independent fiduciary advisors and our role compared to their 401k platform and TPA vendors.

I wish plan sponsors understood the difference between a non-expert retirement plan advisor and one who truly focuses on working with retirement plans and plan participants. Sometimes I feel like our clients have a dentist and think it’s the same as a cardiologist.

My role as a consultant vs advisor. I’m their consultant for the plan and oversee all the aspects, not just investments(advisor).

The need for independent experts and to not rely on one or two “advisors” when making decisions.

The difference between a true retirement plan advisor and one that just dabbles...

What the qualifications or credentials of their advisors are. There are a lot of people who claim to be advisors but have no licenses, qualifications, or oversight to this advice they are providing to plan sponsors, participants, etc.

The difference between specialist advisors and generalist advisors. There are still a LOT of plans being serviced by very unqualified advisors. Also, this is #1 on a VERY long list.

Retirement Income Impacts Retirement Outcomes

The issue of retirement income will impact their plans in the future.

The benefits of in-plan lifetime income.

The impact (both positive and negative) that their employees’ financial wellness has on their quality of work.

The Promise of Plan Design…

The plan regulatory environment is changing, and we need to adapt faster.

That they are the ones most responsible for the success of their plan. Don’t blame the recordkeeper or the advisor.

The needs and benefits of spending just a little more time reviewing and monitoring the plan.

Data mining can improve outcomes in custom communications.

Auto enrollment & re-enrollment are the simplest and most effective tools you have to create better outcomes for your employees.

Process, process, process…

Plan design is the primary change maker - if we want to alter participant behavior, design the plan so employees must take action to make decisions that would lead to less optimal outcomes. Document your actions and decisions.

The importance of getting a new hire or terminated participants attention around regarding the 401(k) plan.

Auto enrollment is welcomed by participants.

Ask pretty much any retirement plan sponsor, and they’ll tell you that their involvement with the retirement plan was, at least initially, “accidental.”

Not all participants use mobile devices and email.

Value of financial wellness and the impact that plays on employee retention.

The importance of clean data, especially census data as a foundation to a smoothly run plan.”

The importance of auto features and how it isn’t them acting like a parent.

I wish some plan sponsors would make 401k more of a priority on plan changes.

The technical aspects of 401k, like discrimination testing.

Auto enroll is FOR employees not TO employees.

The retirement plan isn’t just a benefit of employment. It’s their employee’s future livelihood. Let’s treat it with that level of importance.

Funds can be on watch for various reasons - Does not always mean they should be replaced.

Enrollment and deferral rates are more important than investment performance.

I wish they would understand the detriment of having too many termed participants in their plans.

Pssst… you’re a Fiduciary

We aren’t trying to make their job more difficult by bringing up fiduciary concerns.

Litigation risk and importance of the fiduciary process. They all say it’s important, but I’m not sure they really believe there is liability until it’s in their face.

Plan sponsors have many, many responsibilities. Many of them don’t understand the significance of their fiduciary responsibilities and liabilities

to the extent that they should. Part of my job is to help them understand those responsibilities via Fiduciary Training.

Their fiduciary responsibility is not eliminated by hiring a 3(21) investment advisor.

Their fiduciary responsibility cannot be completely delegated away. Also, that the goals around success metrics is not short-term performance, but long-term sufficiency of savings.

Their fiduciary duties cannot be fulfilled through check-the box approaches.

That they bear chief responsibly for plan compliance but don’t have to do it alone.

What We Do and Don’t

That we are here not to cause more work for them but to help and assist.

I am here to help but I am not the plan administrator. I have no access to your payroll, nor do I want that access.

That advisors don’t have endless resources and/or staff to be able to solve for services that the recordkeeper is in better position to provide.

Many advisors want to provide great education to employees. They deserve the information, and sponsors should assist in providing opportunities for advisors to meet with employees when able.

That we actually care and are not just trying to sell them something.

That we help them keep talent.

The limitations we can have because of compliance.

We’re an extension of their HR team, not their actual HR team.

Cost isn’t the only factor to consider, but the relationship you have with the advisor will make a world of difference to your retirement plan experience.

Their responsibility and what each provider is responsible for...and how to leverage that partnership/support.

How much work is being done on their behalf behind the scenes.

Most advisors are in the business because they want to help. No question is too stupid. We want to help you understand.

We really are trying to help you, but there are rules we need to follow e.g. If you do not want us to be a 3(38), you (the plan sponsor) need to be involved in the investment change process.

I wish they understood the time things take to make changes to plans - either amendments or investment changes

take a few weeks before they can be implemented!

That what we do goes beyond the hours they see us.

The true value of having a plan and truly understanding what we do as consultants.

Some only see it as a quarterly meeting, my job is to paint the picture.

What Plan Sponsors (should) Know/Do

Stop pushing 401k plan down the list of importance.

Benefits cost money. It’s okay to spend money on your employees and that 401(k) is simply a part of the larger total compensation package.

That the plan is theirs, not mine, and they need to take ownership of it.

Your employees (plan participants) mirror your attitude of the 401k plan.

Some plan sponsors need more handholding and need more of a personal touch - not just “reminder” emails!

Their retirement plan does help improve employee engagement.

Their support of the programs we install helps drive success. For example, attend the meetings we offer the participants.

The power they have to change others’ lives.

That delegation does not mean the absence of involvement.

How to respond to e-mails.

The importance of longer-term thinking re: plan investments as well as decision-making for ALL participants.

Their role in financial education/ guidance for their employees.

The 401k is more important and should be higher on their priority list.

How hard it is for us to get in front of their employees if they are not an advocate for us. Also, a clearer understanding of the roles of the players in 401(k).

They don’t know everything :) Fees, Costs and Value RFPs cost time and money.

Cheaper isn’t always better.

Fees are secondary to service and fiduciary support.

Value of services provided - vs. just cost.

Provider fees and the different levels of service associated with them.

That cost is only an issue in the absence of value.

It’s not always about getting the cheapest price. Provide the best product and services for the benefit of your employees.

What they are paying their current advisor for.

“THE MAGNITUDE OF LIABILITY EXPOSURE THAT THE FIDUCIARY ROLE HAS ON THEIR FIRM.”

Managed Accounts do not have to be costly.

Cost is not the most important factor; a higher level of service might result in higher costs.

The ripple impact of many Committees’ thirst for lowering fees (for r/ks and advisors) has led to support quality deterioration, talented turnover, and inevitable forced conversions due to r/k consolidation. The latter point is a time vampire to advisors.

That equal to cost savings is reliability. At some point, it’s worth paying slightly more if it means that they will have a more consistent experience.

Fees have to be reasonable, not the lowest in the industry. A good retirement plan professional is worth their fee.

That all-in cost is the best way to benchmark plan costs. I have heard too many times a plan sponsor state that a platform will “do their plan for free” when there are always costs associated with the plan whether it be a direct or indirect cost.

The race to the bottom does not equal a prudent decision.

Relationships matter and when they cheap out on service to save money, it eventually costs them more because we will leave to go to another provider.

We’re All in “This” Together

We are frustrated with service levels too.

They have a lot of responsibilities, and they need to determine the parts they want to keep and delegate the rest to qualified experts.

How important their role and the partnership with the advisor is.

In today’s environment advisors are also struggling to attract and retain talent. We’re all stretched.

Shortage of quality labor is affecting recordkeepers. Just like everyone else.

I wish plan sponsors understood that advisors are typically not administrative fiduciaries, therefore, we aren’t responsible for administrative errors that may occur on their part or the part of their recordkeeper.

Some Tips for Running a Better Running Plan

The importance of good controls and processes in order to minimize the frequency of plan corrections.

The different roles of the service providers to the plan (e.g., what the TPA does, what the recordkeeper does, and what the advisor does).

The importance of getting the data correct initially and continually.

What they need to do to make plans work properly. In other words, listen to me.

The fact that education works best if they choose to make it important.

The payroll department is the cause of most plan errors.

How little investments matter with regard to employee outcomes.

Keeping the IPS straight and when/ why we replace funds. Meaning, just because it fails for four quarters - you don’t get rid of it. There are reasons under the hood you might want to watch, wait, and see how things play out.

Set it and forget it is not a good plan.

The choice of payroll provider and the quality of your data is the most

important factor to your retirement plan’s success.

And Finally—Some Closing General Observations

Just because the K plan benefit is “cheap” in relation to other benefits, it does not mean it isn’t critical to their employee’s wellbeing. I think more and more are beginning to understand this now.

If they’re going to ask 50 questions in an RFP, have the courtesy to have EVERY person on your committee read the answers to ALL 50 questions! Also, if you don’t understand the question, you likely won’t understand the answer so ask questions that mean something to you rather than copying and pasting questions you really don’t care about.

Great advice, platforms, and support cost money and are not always delivered by giants.

I wish our industry understood the value of our industry. Plan sponsors are not responsible for fee compression or their perceived lack of caring. In the absence of our industry understanding and promoting our industry our value, we let low cost dominate.

We should use less jargon. We have made this business about fees because we feel guilty about it, so we tackled it as well, instead of showing or delivering value.

I wish they had a better appreciation for the fact more people (especially younger workers) are comfortable with, or even expect an Auto Enrollment arrangement. I think some of the older HR executives still feel as if they are forcing something on their workers whether they want it or not, instead of looking at it as a benefit they are providing their employees who can refuse it if they wish. SI

Talking “Points”

There’s a LOT to talk about when supporting and serving retirement plans, everything from the day-to-day issues of payroll deposits and reconcilement to cybersecurity measures, from ESG (re) considerations to—well, you name it.

That said, there is inevitably an unacknowledged elephant in the corner of every discussion room— and we asked our Summit Insiders to speak up and tell us, “What are we not talking about that everybody SHOULD be talking about?”

And so, acknowledging that many of these topics DID come up at the NAPA 401(k) Summit, here’s a sampling:

The Government and 401(k)

A government run, non-ERISA retirement plan with a 1% nonelective and a safe harbor-like match will put us all out of business.

Government taking over 401(k) plans.

Low saving rates and possible government control of retirement plans.

Government run retirement plans that may be a possibility in the future.

Focus on keeping the government out!

State mandated plans (like in Illinois) will end up being a compliance and fiduciary nightmare.

I think the scariest thing I’ve ever read is that the Federal government is thinking about taking over retirement plans. that the Treasury is going to manage the assets! This will be a train wreck if they actually are able to pull it off. (I’d say this even if I wasn’t in the industry.)

The threat of a federal takeover of our industry.

RSAA. It is the biggest threat to our industry that I have seen.

From Brian’s opening session, it seems like this should be obvious. The government really wants to take over the 401(k) system??? Holy Schnikes!

State sponsored plans are designed to make 401(k) start-ups harder.

The attempt by government at both the state and federal level to take over all retirement plans.

The push in Washington to nationalize retirement is very concerning.

The Rise of Roth?

Figuring out the Roth match of SECURE 2.0 Act.

Rothification’s impact on the longterm tax federal tax revenue. What are the impacts when a generation of people retire with higher percentages (or 100% Roth) retirement savings?

Dynamic Roth based on participants income.

I am particularly weary of government not understanding the realities in corporate retirement plans. SECURE 2.0 is a kitchen sink of many changes that recordkeepers and clients have little grasp of how to manage. A key example is providing the option of offering participants an election of how to take employer match (Roth or pre-tax). That single topic in SECURE 2.0 has derailed meetings as the questions range from another money source in the payroll system, how to educate on this, will

the participant be able to convert the er match money source to Roth, what are the corporate tax implications of a ROTH match...to name a few.

Automatic enrollment in Roth v PreTax.

Auto-enrollment into Roth 401k instead of pretax. The majority of Auto-Enrollment participants are young and earning less than most. The majority pay little to no taxes, yet we auto-enroll them in pretax, virtually guaranteeing they pay higher taxes on those dollars in retirement when tax brackets could very well be much higher.

Rebranding Retirement

“I think that our industry needs to stop talking about “”retirement”” and reframe our message around “”financial success””. Ask a person under age 40 if they are thinking about retirement and you will get a glazed look. Ask the same person if they would like to be financially successful. The answer will be Yes. A 401k is the first step to establish financial success.

Small Plan Service & Profitability

How to make small plans more affordable from the recordkeeper. If we are going to fix the gap in coverage, we need more recordkeepers willing to do start up plans at fair prices and see the opportunity for growth.

As an industry, the more complex we make legislation and regulation the more expensive it is for small plans to exist, which in turn exacerbates the coverage problem and retirement savings and financial independence for workers.“

Rollovers - in the sense that in small micro plans you want retired/ nonemployees out of the plan. You are trying to stay under 120

participants. And fees are often per participant.

Simple and affordable solutions that are tech based to help start up plans.

That even small businesses can benefit from a customized retirement plan for the owners and their employees.

Recordkeeper service to small plans (under $5M) is getting horrible. The “team” service structure sucks!

Micro and small plans need more handholding than larger plans, and while MEPS, PEPs and GOPs may have some operational efficiencies, they do not help with the time needed to explain to the plan sponsor what they still need to do from an administrative basis internally. They often do not have payroll or accounting systems that are 180 or 360 integrated. They do not understand how to properly

complete the census, the definitions of compensation, or the eligibility requirements. This will be more prevalent with the expansion of plans in the micro and small plan space due to SECURE 2.0.

Managed Accounts

The lack of performance information on managed accounts. I.e., how to compare managed account performance to other investments, like target date funds.

The cost associated with managed accounts.

“How much money some recordkeepers make from managed accounts.

The use of revenue from managed accounts to lower the recordkeeping costs.

The need to deliver managed accounts at a very inexpensive price

point to proactively “avoid” it being the next litigation nightmare.

The risks of managed accounts being employed in plans. Many firms are getting involved in this, but is it truly the right solution?

Investment options in the plan should be more simplified. Even to just offering a target-date, risk-based, and managed account options. Very few actually want to design their own portfolios. Some advisors might feel that choosing funds for the committee and walking employees through portfolios design add value. But in reality, the only thing that matters is the retirement savings rate, provided there are the “easy button” solutions for the employee to choose from. And to make sure they define their beneficiary. Everything else should be easy and automatic. The advisor should do more to educate and help in the “managing your money” field rather than “allocating your portfolio” field.

Managed accounts balance driven versus age driven.

The cost of managed account services.

Back to Managed Accounts.While the R/Ks offer perfectly reasonable services, they don’t do a good job of explaining the added costs (imagine that) or the fact that they work best for participants with 1) higher asset levels, and/or 2) outside/spousal assets to incorporate. The number of 26-year-old participants with < $30k balance I’ve had to withdraw from these expensive programs is mind-blowing.

Litigation over-managed accounts. It’s being talked about but not to the degree that I think the risk entails.

Artificial Intelligence (AI)

AI without a doubt, it is going to change everything, and nobody seems to care or be looking in this industry. It’s really amazing. People think it’s going to replace their jobs and that is not correct. This is an industry always striving for scale and AI is the ultimate partner for that.

Chat GPT and how it can help us.

What does retirement look like if AI renders all white-collar level professionals redundant in a generation.

Well, I think a lot of folks are talking about it but AI. AI will change the way we as advisors market to our clients making scalability all the more possible.

The role of AI with DC plans.

How AI will affect our business.

Competition/Competitive Environment

The RKs competing with us for participants was not really talked about at the conference.

The disparity between wire house firms and RIAs in terms of compliance. Wire house advisors have strict compliance e oversight and RIA’s can say and do anything.

The majority of advisors in the industry are ageing and there are not many young advisors to replace them.

How this industry feels like it’s always after the “newest thing” without actually thinking through what it means if it doesn’t work out.

The conflict of issues at the recordkeeper, aggregator, managed accounts, RFP process and fund screening is actually increasing as of late.

Service at Recordkeepers (steady decline over the past few years). Which may not be any different from most industries since COVID, but still very noticeable.

Fee compression among advisors

Best tactics to avoid fee compression.

What fee compression has done to services and outcomes.

Fee compression and its impact on vendor service issues.

Recordkeeper and TPA labor shortage that will occur with 2.0.

Elimination of advisors/consultants from the business models of recordkeepers.

The potential service threat from recordkeepers as the market continues to consolidate.

Consolidation of plan service providers has devastated customer service quality. TPA’s are hugely struggling with under-staffing. They don’t seem to be able to find enough

quality hires and the staff that are onboard are over-worked. There will be a reckoning. Mistakes are being made and they are not all apparent yet.

The service degradation at our recordkeeping partners. I understand the Great Resignation and the negative impact of all the recent industry consolidation, but advisors and our clients are having to pick up the pieces and do a LOT more consulting, handholding, and problem resolution because the recordkeepers have been dropping the ball. I find it mind-boggling that I should be sitting here having to help a client fill in a ‘sample’ QACA Safe Harbor notice for a $33 million plan, yet here we are. I don’t understand how they get away with it.

How bundled plans with providers are overlooking payroll submission errors. Why are there not safeguards put in place with bundled plans to help mitigate errors.

The turnover in HR personnel and the huge time waster of retraining them.

“ARTIFICIAL INTELLIGENCE (EX/ CHATGPT) AND HOW IT WILL RADICALLY RESHAPE OUR INDUSTRY IN THE COMING YEARS.”

How the race to the bottom is adversely affecting service.

Recordkeepers outsourcing their lack of customer service overseas.

How we are going to service hundreds of thousands of new plans and millions of new participants.

Participants want to retire earlier and earlier and are not prepared.

Financial Wellness

How true total financial planning should be incorporated into the workplace.

Viability studies that can show corporations how better retirement outcomes for their employees can help to significantly reduce the company’s healthcare expenses.

How traditional financial wellness services are failing if you look at utilization of recordkeeping based financial wellness platforms. What no one realizes is that the folks that actually use the tools are the ones that need the help THE LEAST. The biggest issue with financial health is apathy, and lack of accountability for the individual in need. That is why we need an advisor based financial planning curriculum that “pushes” customized financial plans to every participant with specific action plans and accountability led by the advisor.

Financial Wellness isn’t working. We have to change the bad habits of our younger participants.

How we can actively sell the financial wellness aspects of SECURE 2.0 to providers and sponsors.

The need for effective financial education/awareness for employees.

We are just a part of total rewards - we may be better served by focusing on all of the benefits/

programs employers need to offer their workforce and coordinate how the retirement plan and wellness programs are a key component.

The need for financial planning as an employee benefit.

How to provide customized financial planning to participants profitably at scale.

I know financial wellness is a “hot” topic but the plans that we have taken over and the wellness we have seen being performed doesn’t provide true value to participants. We need to make sure the participants who normally wouldn’t have access to a top end advisor can still receive some of that advice through a wellness program.

The needle is not moving as much these days and financial education versus wellness is still a major need.

Coverage/Savings Patterns

I think the language needs to change. The whole industry is parroting the government...so many people have no retirement access. This is patently NOT true. Everyone with earned income can fund an IRA. The real issue is education and the government acknowledging they must FORCE/ REQUIRE contributions. Why did they not use an independent IRA solution? ...because they are collecting income taxes on these Roth contributions.

There is a lot of talk about coverage. But the majority of the people that are covered still don’t have nearly enough savings to get them through retirement.

I am seeing an abundance of younger people saving more than I ever have with proper financial education through the services we provide as an advisor. It is rewarding to see.

Low participation rates of the young and less compensated employees.

Adequate retirement savings and starting early.

Low participant balances.

I know that SECURE has the Lost and Found and the exchange between some recordkeepers, but it’s not enough. We can’t keep constantly allowing participants to have a “hands off” approach. They need to take ownership of their retirement plan as it is a valuable asset.“

The wealth/income gap. This gap is why so many younger workers are not contributing. Many employees simply cannot afford to contribute to their employer sponsored plan because they are living paycheck to paycheck.

The larger retirement crisis looming for Millennials long after the Boomers are gone. Their generational outlook is horrific.

The financial education of our youth.

If I could offer any additional legislation, it would be that spouses should also have access to saving in a plan if they are home taking care of children. Perhaps increase savings for married couples.

Lack of employee participation.

There is a genuine financial crisis in America, and most people are not saving enough. This reality necessitates employers’ involvement as studies demonstrate that financial security significantly impacts day-to-day morale, stress, and work productivity.

There will be a retirement crisis within the next couple of decades as employees are not saving enough.

Stagnant wage growth restricts the ability for people to save. add on inflation, and you have a troubling possibility of stagnant or decreasing plan flows.

I may be in the minority, but I think the lack of attention to the Social Security system and the irresponsible spending in Washington is going to severely alter most plan participants’ ability to retire.

Compliance

I come from the fiduciary world 3(16), 402 and 3(38), I have found that there is a HUGE disconnect with unbundled setups (difference recordkeeper and TPA). The daily workload to ensure a plan remains in compliance at all times with IRS and DOL regulations is pretty cumbersome. I am the middle person making sure all dots connect between all parties servicing the plan (including the plan sponsor and/ or plan contact). No one is talking about this, (the connecting piece of getting all service providers on the page working together to ensure plan compliance). There are so many plans that are out of compliance for various reasons. If a plan has compliance deficiencies that stand out, I will not bring plan over until it is corrected, and I help them achieve that goal.

How many plans have compliance related issues and who really makes sure employees are getting into the plans on a timely basis.

The loss of service in the recordkeeping industry (due to mergers?). Many firms are going to a DO IT Yourself type structure which affects non-native speakers.

Consolidation does not bring better service.

How to locate competent recordkeepers/TPAs and manage a mutually beneficial relationship. The idea that “none of them are perfect” sounds like sort of a defeated perspective, in my opinion.

Investment Menu Design

Need for better (conservative) allocation. Weakness of US dollar

and dangers of losing reserve currency. I think there’s this common belief to just contribute and not worry about the future as your 401k balance will be higher.

TDF Fit determination.

Some of the new target date funds are built using the recordkeepers fixed account as the fixed income portion of the fund. I think there is a risk to how those funds are sold. I think they are mislabeled in terms of the asset allocation of the funds.

The way we evaluate and manage investment menus in 401k plans is exactly what we tell retail investors NOT to do. We reactively look at short-term past performance and make changes merely because it LOOKS like good risk management to a committee. Committees need to be aware that a 20-year top quartile investment will spend a fair bit of time in the bottom quartile over a period of 20 years. It doesn’t mean that fund should be replaced. Advisors probably know this, but they don’t have the guts to challenge the status quo (because they’ll likely be replaced).

QDIAs are not conservative enough nearing retirement. They decline in value almost as much as the market.

The liability a plan sponsor takes by underwriting the retirement account for termed participants by using inplan guaranteed income options. Not to say there aren’t ways to mitigate the risk, but there should be some awareness around it.

Stable value considerations in a rising interest rate environment.

‘US’

The lack of base qualifications required of advisors to serve ERISA plans. Even well-intentioned generalists can do a lot of long-term damage.

The perceived (lack of) integrity of the industry.

The future of our industry, if there is a future.

The lack of IRS audits - now we are the wild west.

Innovative advisors that are doing what few do in the participant education space.

The current overburdened state of our back offices.

Finding and training new employees, especially advisors.

Next gen advisors – the lack thereof. Succession planning, M&A, how to efficiently transfer clients from the mass of retiring advisors.

How to hire salaried advisors that do the touch points with the plan sponsor and participants.

A general lack of expertise in this field compared to the number of advisors servicing plans.

How advisors get paid determines who they work for. I believe many advisors would say they work for the plan sponsor but if they are paid by the participants, that’s who they work for! SI

“THE POWER WE SHARE WHEN WE ALL WORK TOGETHER.”