Market volatility? New investment possibilities? Guaranteed lifetime income options? Policy changes? Regulation? De-regulation? Confusion and uneasiness trigger fears for retirement savers, and plan sponsors too. Fear can propel hasty decisions, like halting contributions, panic-selling, or hurried shifts with investment options. As a retirement plan sponsor, now’s the time to make sure participants are receiving plenty of clear communication and education, as well as to make sure you have the right protections in place.
You Just Never Know
That’s true of ERISA retirement plans, and, honestly, to a degree, with retirement planning and saving itself, right? While you can’t guarantee a successful retirement for anyone, saving up sure helps, and as a retirement plan sponsor, you are making it possible for your employees to do exactly that. Ideally, volatile markets and uncertain times won’t provoke plan participants to make sudden turns with their savings decisions. Toward that end, in the best possible scenario, you’re already seeing to it that your plan participants are getting plenty of helpful communications and financial education services. As behavioral economist and professor, Shlomo Benartz, puts it, the “best medicine” against rash decisions in volatile markets is prevention, via ongoing, well planned communication, which avoids a scramble over what participants need to hear in times of shift.
We can’t always be ahead of everything though, so even if you have not yet fine tuned key communications and financial literacy programming for your retirement plan participants, there’s still plenty of constructive steps you can take to provide guidance through uncertain times. For example, World Advisors encourages these strategies to support employees when the news has them feeling uneasy:
- Provide Clear and Consistent Communication. During periods of market turbulence, silence can fuel anxiety. Keep employees informed through regular communications that address current market conditions, potential impacts on retirement accounts, and the importance of staying the course….
- Emphasize a Long-Term Perspective. Encourage employees to focus on long-term investment goals rather than short-term market fluctuations. Offer educational resources that explain the benefits of dollar-cost averaging and maintaining a diversified portfolio.
- Offer Financial Wellness Programs….Implementing financial wellness programs can empower employees to make informed decisions. Partner with financial advisors to host workshops or one-on-one consultations to address individual concerns.
- Encourage Diversification and Risk Assessment. Educate employees on the importance of diversification as a risk management strategy. Provide tools and resources that help them assess their risk tolerance and adjust allocations….
- Make Use of Digital Tools and Platforms. Leverage digital platforms that offer personalized insights and projections. This information allows employees to see potential long-term outcomes….
High Expectations
Given the importance of ensuring that plans are ERISA compliant and provide beneficial services to participants, the Society for Human Resources Management encourages retirement plan sponsors to have high expectations whenever contracting with and monitoring service providers. For example, are your retirement service providers excelling at giving participants high quality, data-rich information, and education? If not, how can it be improved? Remember as well: anxious plan participants can be tempted to find someone to blame for the ups and downs of markets. Why not the plan sponsor? As FiduciaryNews points out: “When your 401k is way down, you start to pay attention to the small things like fees and wonder if your plan sponsor is doing their part to help you save money.”
Though retirement plan sponsors are not generally liable for an employee’s disappointing investment choices in an ERISA plan, hungry plaintiff lawyers can make cases pointing to the options available, as well as failure to provide proactive, consistent, educational guidance in support of plan participant decision making. Even if nothing’s been done wrong, defense against an allegation proves costly and disruptive for retirement plan sponsors. For example, the hourly fee for ERISA defense is upwards of $600. To ensure that all retirement plan sponsors can protect themselves with fiduciary liability insurance, Colonial Surety Company provides coverage for an annual premium that is less than one hour with an expert ERISA lawyer if disaster strikes—and we even include cyber liability insurance at no extra cost.
With so many unknowns ahead, protection is the surest path forward. If you face claims that you have failed in your responsibilities as a retirement plan sponsor, the only type of protection that shields you personally is Fiduciary Liability Insurance—-with it, you’ll be armed with coverage for defense and penalties. Without Fiduciary Liability Insurance, your personal assets are exposed. For a few dollars a day, Colonial Surety Company’s Fiduciary+ Cyber Liability Insurance bundle arms retirement plan sponsors with:
- $1,000,000 for Defense and Penalties if you are faced with alleged or actual breaches of fiduciary duty.
- Cybersecurity Coverage for the business and plan, which addresses Department of Labor recommendations, and includes expert response services to curtail damage after an incident.
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