Plan Sponsors: What’s On Your Mind?



According to recent research from Fidelity Investments, about three quarters of retirement plan sponsors say they are “very satisfied” that the company plan is meeting objectives. However, many are concerned about how well the plan is aiding in the recruitment and retention of talent. Adjustments under consideration in the home stretch of the year include increasing matching contributions.


Opportunities Ahead…

Summarizing Fidelity Investments’ 14th annual Plan Sponsor Attitudes study, Brian

Anderson, Editor-in-Chief at 401k Specialist Magazine notes that overall, “The study characterizes 2023 as a year of opportunity for the retirement plan industry, with rising plan complexities—ranging from investment menu changes to evolving plan designs—creating avenues for greater advisor impact.” Based on responses from 1,351 plan sponsors, “who use a wide variety of recordkeepers, not just Fidelity,” the research includedplans with at least 25 participants and $3 million in assets, from start-ups to plans with more than $250 million in assets.” Although “seventy-four percent of sponsors report being very satisfied that plans are meeting company objectives, with the primary goal of providing adequate retirement savings to successfully replace working income,” plan sponsors do report concerns:


The most notable concerns include whether the plan is helping attract and retain top talent (27%), financially preparing employees for retirement effectively (26%), and reducing retirement plan costs for employees (16%). Almost one-quarter (23%) of plan sponsors are measuring the success of plans based on industry benchmarks for employee participation/savings rate goals, while others measure based on employee happiness (21%) and contribution/saving levels (15%).


Sponsors noted more than half of employees (56%) retire early, some by choice and others by necessity, with 30% due to reasons within their control and 26% due to reasons beyond their control. To combat these competing financial priorities, and to attract and retain talent, 61% of sponsors made changes to employee benefits and 74% actively promoted their retirement plans.


Among the big challenges plan sponsors are confronting is employee turnover: “On average, plan sponsors reported hiring 37% of employees in the past two years, with 58% of tenure at or under the five-year mark. In fact, 71% of sponsors noted such high turnover has created 401(k) plan education challenges within the past year.” In response to current dynamics, most plan sponsors are actively working to implement changes before year end. Specifically, according to Fidelity’s research, “95% of sponsors are expecting to make adjustments in the remainder of the year,” with the most notable including:


  • 26%: Increasing the matching contribution
  • 26%: Increasing the auto-enrollment deferral rate.
  • 26%: Beginning to offer an income replacement fund.


Working With An Advisor

Perhaps not surprisingly, given the responsibilities and risks associated with sponsoring an employee retirement plan governed by the high standards of ERISA, most plan sponsors confirm working with advisors. According to Fidelity:


Ninety-four percent of plan sponsors work with an advisor and/or consultant, with a primary focus on employee education and plan improvement. The study shows plan advisors offer a broad range of services, including education around industry, legislative and fiduciary issues; help with developing and monitoring the investment lineup; and employee education on retirement plans and investment options.


…. Plan sponsors value improved participant outcomes (44%) over any other service offered by their plan advisor. Other notable drivers of value were time spent on plan and administrative support (43%) and providing objectivity when making plan choices (41%).


Though the services of advisors can be invaluable, it’s imperative for plan sponsors to understand that contracting with an advisor does not eliminate the fiduciary risks inherent to plan sponsorship under the high standards of ERISA. Indeed, law experts remind us that anyone and everyone involved in the plan can be held personally accountable: “An entity is a fiduciary with respect to an ERISA plan to the extent that it has any discretionary authority or discretionary responsibility in the administration of the plan. Anyone who exercises discretionary control or authority over the plan’s management, administration, or assets is an ERISA fiduciary even if that person is not listed as a plan fiduciary….”


Of course allegations are not an automatic indication of wrongdoing, but plan sponsors and other fiduciaries named in lawsuits quickly learn that mounting a defense is expensive and burdensome, becoming only more so as cases slog along for years. With dismissal a dim hope, experts agree that proactive protection is now the wisest move for plan sponsors, and Colonial Surety is here to help with affordable Fiduciary Liability Insurance. Armed with this coverage, for a few dollars a day, you’ll have coverage for defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber Liability coverage is included at no extra cost, providing additional protection–for the plan and your companyagainst regulatory actions related to data and privacy, as well as expert response services.




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Important To Know

Even as excessive fee litigation claims brought in 2022 continue to clog up courts, new angles for ERISA lawsuits are being attempted. For example, Plan Sponsor reports: “Among new claims, trends include claims about providers making income from plan participant assets and allegations of imprudence resulting from providers choosing investment funds in the wrong share class….The plaintiff law firms are also introducing ‘new theories of liability’ that allege imprudence against plan sponsors who do not monitor interest float and other indirect income being made by recordkeepers….”


With new liabilities emerging, plan sponsors do not have to shoulder the risks alone: with Colonial Surety’s affordable coverage, in the event of claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll have defense, plus cyber liability Insurance  Colonial even locks in multi-year rates and offers installation payments. Cover yourself, today:


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Pension Plan Professional?

Colonial ensures your plan sponsor clients have the complete coverage they need—and we’ve got protection for you, too. From Errors and Omissions Insurance to Fiduciary Liability Insurance, Employment Practices Liability Insurance–and more, we’re HERE with the coverages pension professionals need to keep their businesses going—and growing.

Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.