By Danae Scott, BBA with Tim Hansen, B.Comm, CFP, CEA
As an employer, it’s important to leverage your group savings plan as part of your total rewards package, but we all have blind spots. This article highlights common challenges employers face and explains why it’s critical to find an advisor who’s aligned with your company to address these concerns.
Challenge #1: Getting the help and support you need
All too often we hear that business owners don’t have much of a relationship, if any, with their group retirement plan provider. Sometimes employers don’t even know who their advisor is, which means they have no one to rely on. The absence of a relationship means an absence of trust because trust is the key factor in your relationship with your advisor. Trust is the foundation of a successful employer sponsored group savings plan.
If you’re working with one of the larger providers, it can be difficult to know who to contact. Sometimes all you get is a long phone tree, and you follow the path only to reach the wrong department. This can be frustrating, especially when you have questions that need answers. As a business owner your questions and concerns can range from knowing what’s best for the company from a business perspective, to complex employee situations, and of course questions about problems with technology platforms.
Depending on the size of your business, pension enrollment can be clunky and stressful. If your business tends to have hiring sprees, you will have enrollment sprees as well. Having to educate your employees on the group savings plan and to enroll them without the help of your advisor or provider can be a scattered and lengthy process. As an employer, you should be offered structured support through the enrollment process that helps streamline your own duties as a manager.
Challenge #2: Understanding how fees are applied and how they affect the cost of group savings plans
The effect of investment management fees is one of the least-understood aspects of group savings plans. This lack of knowledge can have a number of causes. Does your current advisor explain exactly how the fees work and how things could be done differently? How do you know if the fees are comparable to what other groups your size are paying?
Investment fees have two parts: how your advisor gets paid and how the investment company gets paid. Sometimes lack of clarity creates confusion and misunderstanding. It is crucial to have conversations about fees with your trusted advisor — you should feel comfortable asking these important questions. Understanding fees will help you to ensure your employees are well-equipped for a successful retirement
through their group saving plan.
Challenge #3: Knowing the key elements that affect your group retirement plan
Do you know how your pension plan decisions influence the growth of your employees’ retirement account — positively or negatively? Without proper support from an advisor or provider, you may not be sure what to watch for. Saving in a group plan means the money is pooled, and as the pool grows, lower fees can be negotiated. A saving of even 1% on fees can have a significant impact on the return on investment for your employees. Your plan’s fee structure should be reviewed often, especially if your company is growing or if your employees are actively saving with voluntary contributions beyond the employer matched portion.
Another key factor when managing a group retirement plan is ensuring that appropriate investments are offered; that is, a range of diversified funds that offer suitable options for everyone.
Lack of knowledge also comes into play with the capital accumulation plan (CAP) guidelines. Do you know what you’re responsible for and what you need to do to comply with the CAP guidelines? The CAP has many components. You are a specialist in your business; you shouldn’t have to be a pension specialist too.
Challenge #4: Getting sound advice from a specialist instead of “water cooler” tips
When you’re looking for reliable advice on what’s best for your company and your employees, there should be a predictable process you can follow. If you’re dealing directly with a large plan provider, you may find yourself speaking with different representatives every time. This can be frustrating.
When you have a consistent point of contact to address your questions and concerns and to work through roadblocks, you will develop a common understanding with your representative, which is more likely to lead to success. Dealing with a broker who is aligned with your company mission and values can even help identify roadblocks in advance and create a plan to work past them.
The same is true for your employees. Typically, not many employees are familiar with their group saving plan and they do have questions. Employees don’t feel empowered to reach out for advice or help on something if it’s difficult. Members can lose their excitement about their retirement saving plan quickly if they don’t feel supported or if they can’t get the help they need. Employees appreciate having a relationship with the person they’re asking for advice. The care factor matters. How willing are you to take advice if you don’t trust the person giving it or feel they care?
Challenge #5: Knowing who your advisor is
One of the biggest gaps employers face is the fact that they often don’t know who their advisor is. This is the fault of the advisors! Actions speak louder than words — if there’s no action, the care factor is clearly missing. Expect your advisor to care about the advice and guidance they provide for you, your business, and your team.
If you don’t know your current advisor, how can you trust them? Can you trust that they are reviewing the fees in your plan? A good relationship with your advisor is the foundation of a successful group savings plan for your business and employees. You should know that they genuinely have your best interests in mind.
Challenge #6: Educating your employees
Do your employees understand the immense benefit of their group retirement savings plan? Websites are great for providing value added material, but self-education doesn’t necessarily help your employees as much as an informative webinar or face-to-face enrollment meetings. It’s important that your employees know why their group plan is beneficial, and it’s important that they have confidence in you as an employer, knowing they are taken care of. Financial education should be ongoing, and you know best how to support your workers as they learn.
Although anyone can book a meeting with a financial advisor, some simply won’t. When it comes time to retire, they will likely need support to decide on their next steps. Your employees may not know the different options available to them as they head into retirement. This is another reason why working with a trusted advisor is crucial: you’ll know your employees are well supported.
Challenge #7: Understanding your total compensation package and knowing you have it right
The fact that you have a group retirement plan in place is great for many reasons, but especially because it shows your values as a company. In addition, a group retirement plan is a strategic part of your total compensation that helps your business to attract and retain employees. When it comes to total compensation for your employees, there are key monetary savings for your business, but this requires strategic action.
An important area where many companies miss the mark is aligning the group retirement plan with the rest of the total rewards package. Sometimes decisions are made in isolation. Your benefits plan and other perks could be in complete alignment, but the group savings could be structured much differently. This misalignment can create confusion for employees and undermine the value of the savings plan. Group savings need to be an integral part of the overall benefits conversation — it’s an important part of your total rewards.
It’s imperative to be strategic in your business decisions and to back those decisions with proven processes and data. Working with an advisor who understands this is key. An experienced advisor can help align your group retirement plan with your total rewards package and provide guidance on how to implement it in your business.
Summary
From knowing your advisor, to accessing key information and support, to educating your employees and making strategic decisions, there is a lot to consider when administering a group retirement plan. There’s no doubt that you need guidance and support to do it effectively. Working with a trusted advisor or broker can help meet these challenges and close the gaps to create a successful long-term strategy for your business.
The first step in aligning your group retirement plan with your company values and total rewards is to work with an advisor who is aligned with you. Seek support from the people and companies you choose to work with. If you’d like to dive deeper into some of the challenges that resonate with you and apply to your business, take action now and meet with our pension advisor, Tim Hansen, and our Sutton Pension Team. Sometimes you don’t know what you don’t know! We want to help you learn and to be the aligned support you need.
