Two recent peer reviewed studies have come to the same conclusion - the workers compensation patients that they assessed were having worse post-surgical outcomes than non-workers compensation patients who underwent the same procedures.
Even though the workers compensation patients in the study were younger and in some ways healthier on average than the non-workers compensation group, in the year that followed their surgical operation, the workers compensation patients had lower return-to-work rates and reported a greater degree of pain and disability as well.
To be clear, these studies were published in the peer-reviewed Journal of Neurosurgery focusing on the spine and involved nearly 10 years of data from a large number of hospital systems, encompassing almost 40 thousand patients who underwent surgeries on a particular area of their lower spinal columns.
That said, there doesn’t seem to be a readily apparent cause that links these spinal injuries/procedures to the comparatively bad outcomes experienced by workers comp patients relative to the non-workers comp counterparts who had the same medical issue and received the same type of care to correct it. While the workers compensation group had greater proportions of patients who smoke and who are obese, whether or not a patient had workers comp status or not seems to have a greater correlation to these negative post-operation experiences.
The studies did suggest, however, that there could be a number of other factors that may very well have contributed to this phenomenon, including socioeconomic disparities between the workers comp and non-workers comp groups. Differing ranges of average injury severity between the groups could be influencing the results too.
Further, and perhaps most notably, there may also be differing incentives between workers comp and non-workers comp patients in assessing the severity of their injury and resulting disability in terms of maximizing disability payments and other related benefits that may become available as on-the-job injuries worsen.
The authors note that additional study is necessary to evaluate the various factors that are causing these disparities in post-surgical responses between workers comp and non-workers comp groups in order to determine which factors are most responsible. Once the main causes are identified, they can then potentially be better addressed in order to minimize their negative impact, which is especially important in light of the additional treatment expenses incurred by workers comp patients on average, as well as the decreased quality of life and increased likelihood of developing pain-management-related addictions as well.
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One of the latest benefits that has been growing in popularity among some of the top companies in the world is employers providing employees with special access to college admissions counselors.
The increasing prevalence of college admissions counseling benefits also coincides with the general rising popularity of education-related employee benefits, with a growing number of employers already offering tuition assistance and/or student loan repayment help and guidance.
Some companies that have added college admission counseling services to their employee benefits package offerings include JPMorgan Chase, American Express, Mastercard, and Johnson & Johnson.
While the practice of adding college admissions coaching has a longer history as a perk among hedge fund employees and other executives in the financial sector, the offering has seen much broader adoption in other industries in recent years as its effectiveness in attracting proactive, creative, and forward-thinking employees has been on display.
Further, given the high stakes and highly competitive college admissions environment, and given how the sometimes overwhelming nature of the application process can become somewhat all-consuming for applicants and their parents alike, offering benefits that can help both streamline that process and reduce the accompanying stress can be a significant benefit to business productivity as well.
While critics of college admissions coaching as an employee benefit rightly point to the fact that these offerings can worsen inequalities that already exist in the college admissions process, including inequitable distribution of limited college admission coaching resources as is, the effectiveness of this kind of counseling and its scarcity both increase the value of their value as an employee perk.
Currently, most families in the US depend on the advice and advocacy of the college counselors provided by the public high school system, who only spend about 22% of their work hours on college admissions advising according to the National Association of College Admissions Advising. Given the available time and resources and in light of an already overwhelming case load, it has become essentially impossible for college counselors to provide personalized attention to every student.
It’s also worth noting that one of the main reasons that personalized attention and the guidance of admissions counselors is at such a premium in the current admissions environment is the complexity of the admissions process itself. The colleges and universities themselves could take significant action to minimize the advantage that access to college counselors provides to applicants and close the outcome gap between the haves and have-nots simply by streamlining their own admissions requirements and updating their user interface to meet the abilities and expectations of their applicants without the assistance of third-party, professional help.
Often even more complex than the admissions process is the process of obtaining scholarships and financial aid. Finding applicable scholarships and/or other forms of financial assistance and then applying for those opportunities in such a way as to have a realistic chance of obtaining them is another area that admissions counselors can be crucial in navigating, which further exacerbates the inequality gap and places these forms of financial help further out of reach for those who need them most.
Until more colleges and universities take those steps, however, the value of college admissions counseling services as an employee benefit will likely continue to grow as more and more companies and their employees take advantage of the opportunity.
You can read more about this topic here.
There are many regulatory and other duties that a 401(k) custodian must perform for a retirement plan that they manage. These requirements make hiring the right custodian a crucial decision that can impact the success and effectiveness of your company's retirement plan. A custodian is responsible for holding and safeguarding the plan assets, ensuring compliance with regulations, and providing essential administrative services.
Each of these makes a 401(k) plan custodian an essential part of the team that works to ensure that your plan is set up to best suit the needs of participants. To help you choose the right one for your plan’s unique needs, this article will cover 8 common mistakes to avoid when hiring a 401(k) plan custodian.
One of the most significant mistakes made by employers is not conducting thorough research on potential 401(k) custodians. Many simply seek out well-known financial institutions without fully exploring the other options that may be available to them, without even knowing if they will be the best fit.
Take the time to research and compare multiple custodians, considering factors such as their reputation, experience, service offerings, fees, and client reviews. An informed decision can lead to a more suitable custodian for your plan, especially for a small business that may be low on the priority list for a large financial firm.
401(k) custodians may offer a range of service options, from basic recordkeeping to more comprehensive plan administration and investment management. It's essential to understand the scope of services provided by each custodian and assess whether they align with your company's needs. Choosing a custodian that offers tailored solutions can significantly benefit plan participants and streamline plan management.
The fees charged by 401(k) custodians can vary significantly and have a direct impact on the plan's overall costs and participant outcomes. Some custodians may have hidden fees or complex fee structures that can be challenging to understand. Look for transparent and competitive fee arrangements, and ensure you have a clear understanding of all costs involved.
If you later find that the custodian you chose has hidden fees that change your cost/benefit analysis, it may be worth your effort to find a new one.
401(k) plans are subject to various legal and regulatory requirements, including those set forth by the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Employee Retirement Income Security Act (ERISA). Choosing a custodian that is experienced in retirement plan administration and compliance is critical. Failure to comply with regulations can result in costly penalties and liabilities for your company, even if done at the hands of your custodian. This makes it imperative to do your due diligence and find one who is dependable and has a history of meeting their requirements.
A user-friendly and technologically advanced platform can greatly enhance the participant experience and encourage engagement with the retirement plan. Look for a custodian that offers a modern, intuitive, and accessible online interface for both employers and employees. A seamless user experience can lead to increased participation and better plan outcomes.
A custodian's reputation and track record are indicative of their performance and commitment to client satisfaction. Consider reviewing client testimonials, case studies, and independent ratings to gauge the custodian's reliability and level of service. A custodian with a positive reputation and proven results is more likely to be a trustworthy and valuable partner.
You may want to ask potential custodians for the contact information of their current or former clients. If they balk at the suggestion, that may be seen as a red flag that prevents you from getting firsthand testimonials of their performance.
Efficient and responsive customer support is essential when managing a retirement plan. Consider how accessible the custodian's support team is and how they handle inquiries and issues. Timely and helpful customer support can resolve problems quickly and ensure a positive experience for both employers and participants.
Some custodians offer fiduciary services, which means they assume some or all of the fiduciary responsibilities for the plan. Engaging a custodian that acts as a fiduciary can provide an additional layer of protection for plan sponsors, as the custodian will share the responsibility of acting in the best interests of plan participants.
A 401(k) custodian has a major role to play in the administration and regulatory compliance of your plan. Choosing the right one that is the best fit for your plan is an important step in the process of building a plan for your employees, and should not be taken lightly.
Avoiding the common mistakes outlined above when hiring a 401(k) custodian is essential to establishing a successful and well-managed retirement plan. Conduct thorough research, understand the custodian's services and fee structures, ensure compliance with regulations, and prioritize customer support and user experience. A well-chosen 401(k) custodian can play a vital role in enhancing the retirement readiness of your employees and providing peace of mind for plan sponsors.
The Employee Retirement Income Security Act (ERISA) is a federal law that was enacted in 1974 to protect the rights and interests of employees who participate in most employer-sponsored retirement plans, including 401(k) plans. ERISA sets forth regulations and standards that govern the operation, administration, and fiduciary responsibilities of these plans.
It is imperative that any employer who offers a retirement plan to their employees ensures that they have a team in place that complies with ERISA regulations and filing requirements. This law was put into place to protect retirement plan participants, and significant penalties may be levied if a plan falls out of compliance.
In the article below, we will explore how ERISA impacts 401(k) plans and the key aspects that employers, plan administrators, and participants should be aware of.
ERISA stands for the Employee Retirement Income Security Act, a federal law that establishes minimum standards for private-sector retirement plans. Its primary goal is to safeguard the retirement savings of employees by ensuring plan transparency, fiduciary responsibilities, and accountability. ERISA covers various types of retirement plans, including pension plans, profit-sharing plans, and 401(k) plans.
ERISA sets forth comprehensive rules and regulations to protect participants in employer-sponsored retirement plans. It establishes guidelines for plan reporting, disclosure, and fiduciary responsibilities. ERISA also establishes the Pension Benefit Guaranty Corporation (PBGC), a government agency that provides insurance protection for certain defined benefit pension plans.
Under ERISA, employers are required to provide participants with important information about their retirement plans, such as plan features, funding status, investment options, and fee disclosures. Employers must also meet specific fiduciary obligations, which involve acting in the best interests of plan participants and beneficiaries.
ERISA applies to most 401(k) plans offered by private employers. The plans that do fall under its guidelines are subject to ERISA's provisions, including reporting and disclosure requirements, fiduciary responsibilities, and plan administration guidelines. ERISA helps ensure that employers and plan fiduciaries act prudently and in the best interests of the plan participants. These guidelines may seem like a headache to some, but they are in place purely to protect the employees who take part in employer-sponsored plans.
ERISA imposes fiduciary duties on those who manage and control the operation of 401(k) plans. Fiduciaries are required to act solely in the interest of the plan participants and beneficiaries, following the highest standards of care, loyalty, and prudence. They must diversify plan investments to minimize the risk of large losses, ensure that plan expenses are reasonable, and provide participants with accurate and complete information about the plan.
Fiduciaries are also responsible for selecting and monitoring investment options offered in the plan. They should act with diligence and expertise when choosing investment options, considering factors such as risk and return, diversification, and the needs and preferences of plan participants. 401(k) plans are not “one size fits all,” so the fiduciary must ensure that a plan is built in accordance with its participants’ needs.
While most 401(k) plans are subject to ERISA, there are certain types of plans that are exempt. Plans sponsored by governmental entities, such as state and local governments, are generally not covered by ERISA. Similarly, plans established and maintained by churches or religious organizations are also exempt from ERISA regulations.
To determine whether your 401(k) plan is covered by ERISA, you can start by reviewing the plan documents provided by your employer. ERISA-covered plans are typically required to provide participants with a summary plan description (SPD), which outlines key features of the plan and includes information on ERISA coverage.
Additionally, if your plan includes employer contributions or is administered by a third-party administrator, it is more likely to be subject to ERISA regulations. It's important to note that ERISA provides certain rights and protections to plan participants, so understanding whether your plan is covered can help you assess your legal rights and access important information about your retirement benefits.
ERISA plays a vital role in regulating and protecting participants in most employer-sponsored 401(k) plans. It establishes guidelines for plan administration, fiduciary duties, reporting and disclosure requirements, and provides a framework for ensuring the financial security of employees' retirement savings.
By understanding the impact of ERISA on 401(k) plans, both employers and participants can make informed decisions and take advantage of the protections and benefits afforded by this important legislation. A retirement plan is meant to provide a benefit to employees and help secure their financial future. When ERISA guidelines are viewed through the lens of helping to protect the employees and their benefits, their need becomes much easier to understand.
An employer-sponsored 401(k) is one of the most popular retirement savings vehicles in America, but just having one doesn’t guarantee a fruitful retirement. While many individuals rely on 401(k) plans to secure their future, making the right decisions with your investments can mean the difference between a comfortable retirement versus having to work longer than one would like.
Having a knowledgeable and trustworthy advisor who can guide you in making the right decisions can be the key to that difference. There are times when it becomes evident that an advisor is not serving you well as a client and a change in 401(k) advisors is necessary. In this article, we will discuss several key indicators that can help you identify when it may be time to begin the search to change your 401(k) advisor.
A fiduciary advisor is obligated to act in your best interest, putting your financial well-being ahead of their own. If your advisor does not explicitly acknowledge or fulfill this fiduciary duty, it may be a sign that they are not prioritizing your interests. Transparency and clear communication are essential when it comes to understanding the fiduciary relationship, so if you feel your advisor is not sharing this liability with you, it might be time to explore other options.
An experienced 401(k) advisor should go beyond simply recommending investments. They should also offer guidance on plan design and oversight, ensuring your retirement plan aligns with your goals and needs. If your advisor neglects these crucial aspects and fails to provide valuable input on optimizing your plan's structure and monitoring its performance, it may be an indication that they are not delivering the comprehensive support you require.
As you progress through life, your financial situation is bound to change. Whether it's getting married, starting a family, or nearing retirement, these milestones necessitate adjustments to your retirement strategy. If your advisor fails to recognize and adapt to these changes, continuing to provide the same generic advice without considering your evolving circumstances, it may be a sign that they are not adequately attentive or responsive to your needs.
At a minimum, your investment strategy should be changing as you draw nearer to retirement. In your early years, your portfolio can withstand a slightly higher level of risk (equities), as the market tends to perform in a cyclical nature. As you draw closer to retirement, your portfolio should be moving away from risk and towards safer investments that offer a level of protection against market downturns when you need your savings the most.
If your advisor is not rebalancing your portfolio as you get older, that is a sure sign that you may need to find another advisor who better understands risk mitigation in relation to your retirement horizon.
A robust financial wellness program is an essential component of a comprehensive retirement plan. It encompasses various aspects such as budgeting, debt management, and education on financial literacy. If your current advisor does not offer or actively promote a financial wellness program, it could indicate a lack of commitment to your overall financial health. Consider seeking an advisor who places importance on your holistic financial well-being and education.
A transparent fee structure is crucial for understanding the costs associated with your retirement plan. If your current plan has a convoluted fee structure that is difficult to comprehend and your advisor is not willing to explain it to you clearly, it raises concerns about their transparency and whether they have your best interests at heart. A trustworthy advisor should be forthcoming about all fees and actively address any queries or concerns you may have.
If you discover hidden fees that change the overall costs of your investments as your plan progresses, that may present a red flag that should be addressed. An advisor’s fees may be negotiable, but hidden fees that weren’t previously disclosed may be reason enough to shop for a new advisor.
Investment decisions should be based on careful analysis and alignment with your long-term goals, not on impulsive buy or sell recommendations. If your advisor only contacts you to push certain investments or suggest frequent trades without providing comprehensive explanations or reasoning, it could be a sign that they prioritize their own commission over your financial well-being. A reliable advisor should focus on your overall investment strategy rather than short-term gains.
If this happens often, you could be in a situation in which your advisor is committing a practice called “churning.” This may fall under SEC Rule 15c 1-7, which governs any deceptive or manipulative conduct enacted by a broker. If you feel that your advisor is committing “churning” by overtrading your account to grow commissions, you may file a report with the SEC or FINRA.
Effective communication is crucial for a successful client-advisor relationship. If you find that your advisor consistently fails to listen to your concerns, goals, and preferences, it indicates a lack of attentiveness and understanding. Your advisor should actively engage in conversations, address your questions and doubts, and tailor their recommendations to your unique circumstances.
Trust is the foundation of any professional relationship. If you feel hesitant or fearful to reach out to your financial advisor, it is a significant red flag. Open communication is vital for effective financial planning, and if you are uncomfortable discussing your concerns or seeking clarification, it may be a sign that you should consider finding an advisor with whom you can establish a more trusting and transparent connection.
Some advisors prefer to use complicated financial lingo or explain things in overcomplicated ways to either keep their clients in the dark, beholden to the advisor's decisions, or in some cases purely to stoke their own ego. If your advisor makes you feel apprehensive about speaking with them because of the way they communicate, it isn’t likely to lead to a positive working relationship.
In order to achieve the best possible outcomes from your retirement planning efforts, you and your 401(k) advisor need to be able to work together as a team. If you observe any of the following warning signs, it may be time to reevaluate your relationship with your current advisor and explore other options that align better with your needs and goals:
Making the right choice for your financial future is essential, and finding the right advisor is a crucial step toward achieving your retirement aspirations. If you find that any of the warning signs outlined above are present within your current 401(k) advisor, it may be time to find a new one.
Planning for your retirement is one aspect of life in which time is extremely important, as you have a finite amount of it in which to save enough money to last through your Golden Years. If you feel for any reason that your 401(k) advisor does not have you on the right path toward your retirement, it’s time to find one who will guide you in the right direction.
If you are an employer who offers a 401(k) retirement plan for your employees, working with the right advisor is crucial to the plan’s success. There may come a time when it becomes necessary to change the advisor who manages your plan, for any number of reasons. Once an employer has identified the need for a change of advisors, how do they go about doing so?
This article will provide readers with guidance on how an employer can change their 401(k) advisor, by outlining the following:
We hope that you never encounter the need to change your 401(k) plan’s advisor, but this article will help you understand the process should that need arise.
There are several reasons why an employer might consider changing their 401(k) advisor:
When considering changing your 401(k) advisor, you should begin by exploring your options and assessing the market. By knowing what other advisors offer, you can make an informed decision and potentially find a better fit for your plan and participants' needs.
When comparing advisors, consider factors such as:
Knowing the other options that are available may give you the room to negotiate with your current advisor if fees are the main point of contention. If there are other issues at play, doing your due diligence will help you make an informed decision based on the needs unique to your company and plan.
Before making any changes, it's important to benchmark your existing 401(k) advisor and plan against industry standards. You should evaluate the key metrics of your plan such as investment performance, fees, participation rates, and employee satisfaction. This benchmarking process will help you identify areas where improvements can be made and provide a baseline for comparing potential new advisors.
If the cost-efficiency of your plan is the issue, compare the fees charged by your current advisor with industry averages for similarly-sized plans to see if they are reasonable. Assess the transparency of fees and consider whether alternative fee structures, such as flat fees or fee-for-service models, would better suit your plan's participants and needs.
Evaluate the performance of your current 401(k) plan's investment options. Compare their returns to relevant market benchmarks and industry standards. Look for consistent performance over the long term and consider whether your current advisor has the expertise and resources to provide superior investment options.
If the overall market is in a down cycle in which investments are performing poorly across the spectrum, changing your plan advisor may not result in positive outcomes. If the funds offered by your plan are performing more poorly than the rest of the market, however, a change may be what is needed.
The quality of service provided by your 401(k) advisor is crucial for plan success. Evaluate the accessibility and responsiveness of your current advisor, their ability to address participant inquiries, and the level of educational resources that they provide for your plan participants.
Consider whether your plan requires additional services, such as financial wellness programs or personalized participant guidance, and assess whether potential new advisors can fulfill those needs. Advisors will often put a lot of effort into gaining new clients, so this may be an area where you can make providing the needed resources a determinant of their winning your business.
Once you have thoroughly evaluated your current advisor and explored outside options, you may come to the decision that it is time to change your 401(k) advisor. Follow these steps to facilitate a smooth transition:
When changing your 401(k) advisor, it's important to consider the following aspects:
Changing your 401(k) advisor is a major decision that should be driven by the best interests of your plan participants. Before making the determination to change your advisor, you should take the time to assess your current plan’s performance, fees, and the level of service provided by your current advisor. Compare them to industry benchmarks to verify that better options may be available for your employees.
You should take the time to explore alternative options, conduct due diligence on potential new advisors, and consider factors such as fiduciary responsibilities, investments, service levels, participant access, cybersecurity, and fees. Don’t rush the process and switch to the first advisor that you find, as you want to find the best available option for the benefit of your plan participants.
By thoroughly evaluating your options and following a well-planned transition process, you can make a smooth switch to a new 401(k) advisor that better aligns with your plan's goals and enhances participant outcomes. A 401(k) plan is a benefit to your employees, so put in the effort to make it the most beneficial to their retirement outcomes possible by finding the right advisor to manage it.
The Certified Financial Planner (CFP) designation is one of the most widely recognized in the finance industry, and indicates a high level of competence, education, and knowledge within numerous aspects of money and investment management. But what is Certified Financial Planner?
This article will provide comprehensive insights into Certified Financial Planners, their roles, fiduciary duty, the potential costs of hiring one, fee structures, finding a CFP, the certification process, and the CFP exam. If you feel that a Certified Financial Planner is right for your financial needs, we will also outline how to find the right one for you.
A Certified Financial Planner (CFP) is a financial professional who has obtained the CFP certification, a widely recognized and highly regarded standard in the financial planning industry. CFPs have undergone rigorous training, education, and examinations to demonstrate their competence in various areas of financial planning.
A CFP provides comprehensive financial planning services to individuals, families, and businesses. They analyze clients' financial situations, can help to create budgets and set financial goals, and devise strategies to achieve them.
CFPs offer expertise in areas such as investment management, retirement planning, tax planning, estate planning, insurance analysis, and risk management. They provide personalized advice that is tailored to clients' unique circumstances and goals.
CFPs are held to a fiduciary duty, meaning they are legally obligated to act in the best interest of their clients. This fiduciary standard means that CFPs have to prioritize clients' interests over their own and provide advice that is free from conflicts of interest. While this may seem like something that all financial advisors would be bound by, non-fiduciaries are not always obligated to follow this standard.
Working with a CFP who follows the fiduciary standard can provide peace of mind, as it ensures that their recommendations are solely based on the client's best interests rather than outside financial considerations.
The cost of hiring a CFP can vary depending on several factors, such as the complexity of the client's financial situation, the scope of services required, and the CFP's level of experience.
CFPs may charge fees based on a percentage of Assets Under Management (AUM), an hourly rate, a flat fee, or a combination of these approaches. It is essential to have a clear understanding of the fee structure and any potential additional costs before engaging in the services of a CFP. Some advisors may also be willing to negotiate their fee structure, especially for a long-term working relationship.
There is an important difference between fee-only and fee-based advisors that should be understood when considering hiring a CFP:
Finding a CFP involves careful consideration and research to find the right one for your unique needs. Some effective ways to find the right CFP for you include:
To become a Certified Financial Planner, individuals must fulfill several requirements:
The final step in becoming a Certified Financial Planner is passing the CFP exam. This comprehensive exam evaluates a candidate's knowledge and understanding of financial planning concepts, principles, and practices. The exam covers various topics, including financial planning, tax planning, retirement planning, estate planning, investment management, and ethics.
Candidates must demonstrate proficiency in all areas to earn the CFP certification. If you are considering attaining a CFP designation, be aware that it is known as one of the more comprehensive and difficult examinations within the financial industry.
Certified Financial Planners (CFPs) are professionals who possess specialized knowledge and expertise in financial planning. They provide comprehensive advice and guidance to clients, helping them achieve their financial goals. Those clients may be individuals, families, or businesses, as the CFP designation denotes a comprehensive understanding of many different aspects of finance, financial planning, taxes, investments, and money management.
Working with a CFP who adheres to the fiduciary standard ensures that their recommendations are made solely in the client's best interest. When hiring a CFP, it's important to understand the associated costs and fee structures, and that there is a difference between one who is fee-based versus fee-only.
Adding the benefit of a 401(k) plan for your employees can do wonders for morale and retention, but simply setting up a plan isn’t all that is required. The landscape of retirement planning and investment options is constantly evolving, making it crucial to stay informed and ensure that your 401(k) plan is optimized. To be assured that the plan and 401(k) plan advisor are providing the best possible outcomes for participants, employers should routinely conduct a 401(k) plan review.
Regularly reviewing your 401(k) advisor’s diligence is essential for the success of your retirement plan and the financial well-being of your employees. This article will explore the importance of annually reviewing 401(k) advisors, focusing on the key areas to monitor such as plan participation rates, deferral rates, investment diversification, and employee participation based on compensation.
Annual reviews of your 401(k) advisors are crucial for several reasons:
One important aspect to evaluate during your annual review is your plan's participation rate. This measures the percentage of eligible employees who are actively contributing to the 401(k) plan. A low participation rate may indicate a lack of employee engagement, awareness of the plan's benefits, their view of the plan, or whether the 401(k) advisor is providing them with enough education regarding their ability to save for retirement.
If your plan's participation rate is low, consider taking the following actions:
In addition to participation rates, it is essential to review your plan's deferral rates. Deferral rates refer to the percentage of an employee's salary that they contribute to their 401(k) account. Low deferral rates may indicate a need for additional education or encouragement to save more for retirement.
Investment diversification is a critical aspect of a well-designed 401(k) plan. During your annual review, assess the diversification and performance of the investment options offered to participants. Consider the following:
During your annual review, assess the participation rates of highly compensated employees (HCEs) versus non-highly compensated employees (NHCEs). Ensure that the plan does not discriminate in favor of HCEs, as this can lead to compliance issues.
To address any disparities:
As an employer, conducting an annual review of your 401(k) advisors is crucial for maintaining a successful retirement plan. In doing so, you should evaluate the plan’s participation rates, deferral rates, investment diversification, and employee participation based on compensation. It can be helpful to identify areas for potential improvement, implement strategies to enhance participation, and stay on top of keeping the plan’s performance optimized.
Regular reviews ensure compliance, participant satisfaction, and the ability to adapt to changing market conditions, ultimately helping employees achieve their retirement goals. A good 401(k) plan can provide benefits for both the employer and employees. Performing an annual 401(K) plan review can ensure that the plan and its advisor are providing the best possible outcomes to the plan participants.
When structured and implemented well, a 401(k) plan can be an important component of an employee's financial well-being and state of mind. Selecting an advisor for your company’s 401(k) plan is an important first step to building a plan, as they will play a crucial role in its creation, implementation, and administration. The right plan can help to secure your employees’ financial futures, improve employee morale, and help attract and retain top talent to and in your company.
A trusted advisor fosters employee confidence, which in turn can help to maximize engagement. No matter how good of a 401(k) plan you create, it’s not helping anyone if it isn’t being used. This is just one of the many reasons we will outline below for why choosing the right 401(k) advisor is critical to delivering this benefit to your employees.
The needs of most small and medium-sized businesses are different. This makes it imperative that employers choose a competent advisor who can assist in designing and implementing a 401(k) plan that aligns with your company's specific goals and needs. The right advisor should provide guidance on plan design options, investment choices, and other critical factors to ensure the plan is well-suited for your employees' needs.
Furthermore, a good 401(k) advisor can educate both employers and employees about the plan's features, benefits, and contribution options. This can be done through in-person seminars at your company, informational literature outlining the plan, or simply helping you to be prepared for questions that your employees may have.
This educational support helps employees understand the importance of saving for retirement and empowers them to make informed decisions regarding their financial future. Perhaps most importantly, it educates them about their options and gives them control over securing their retirement goals.
A poorly designed 401(k) plan may result in limited investment options, high fees, and inadequate support services. This can negatively impact employee participation, engagement, and overall retirement outcomes. As noted above, a 401(k) plan that isn’t used doesn’t do any good for anyone, so it’s worth making the effort to ensure the plan is beneficial to all.
In addition, a subpar 401(k) plan can expose employers to legal and regulatory risks. Failing to comply with the complex laws and regulations from the IRS and ERISA governing retirement plans can lead to costly penalties and potentially even lawsuits.
401(k) providers typically fulfill three primary functions: the advisor, the custodian, and the record keeper. Each role outlined below must work together to ensure the successful implementation and operation of a 401(k) plan:
When evaluating 401(k) advisors, it is crucial to consider their history of adherence to the fiduciary standard, which means that they are legally obligated to act in the best interest of their clients. This standard ensures that advisors prioritize the welfare of plan participants, and minimizes conflicts of interest that could compromise the plan's success.
In contrast, advisors following the suitability standard are only required to recommend suitable investments, even if they may not be the best option for participants. Employers should prioritize working with fiduciary advisors to provide the highest level of protection for their employees and mitigate potential legal risks.
Choosing a 401(k) plan provider involves evaluating various factors to ensure they align with your company's needs and priorities. The following key aspects should be considered when assessing potential providers:
In addition to assessing the plan provider, you should also take care to evaluate your advisor's qualifications. Consider the following aspects to ensure your advisor is well-equipped to provide quality guidance:
An employer should also consider the financial advisor’s fees when selecting a 401(k) advisor. Different fee structures exist, and some will cost more than others. Some examples of advisor-related fee structures are based on the percentage of Assets Under Management (AUM), hourly fees, or flat fees.
Consider the following aspects related to financial advisor fees:
If you are concerned about financial advisor fees, there are several strategies to consider:
Implementing a 401(k) plan for your company can help to boost morale, attract & retain top talent, and allow your employees to focus on work rather than worrying about their financial future. Selecting the right 401(k) advisor is crucial for both employers and employees, as they will play a major role in the plan’s design and administration.
By considering the importance of a competent advisor, the risks associated with a poor 401(k) plan, and evaluating the functions of 401(k) providers, employers can make informed decisions to protect their plan and employees. From the outset, creating a plan for your company may seem like a monumental task, but the right 401(k) advisor will help shoulder much of the burden and keep the plan on track.
Choosing the right 401(k) advisor for your needs can make the process both efficient and effective, so it’s imperative to do your due diligence based on the information provided above.
In the era of big data, information - even the seemingly mundane - has more value now than it may ever have had before. Living in modern society and interacting with the internet has given most people a first-hand window into just how many data points we each leave behind in our wake and how those histories can be collected, analyzed, and used in a predictive capacity - sometimes with unsettlingly accurate results.
In the business world, collecting as much data about customers as is feasible has become standard operating procedure in many industries. Likewise, collecting operational data including employee performance metrics in support of process improvement and streamlining has become similarly commonplace, as well.
Oftentimes, however, data that is collected from a given source becomes somewhat siloed and is only considered or put to use in the context of the source from which it came. For example, operational data being used exclusively in operational analysis.
Along those lines, many companies have a substantial amount of data available to them at this point many with regard to employee benefits package choices and usage that they have collected over time through various platforms, applications, websites, and benefits providers. With this data, companies typically then refine benefits offerings on an ongoing basis to best meet employee needs and implement benefits strategy as it evolves.
In limiting employee benefits data to employee benefits analyses, however, companies are potentially missing a major opportunity to put that data to work in a number of other ways that can help the company achieve goals well beyond the scope of employee benefits optimization.
Through benefits-related data analysis, companies can get a more complete picture of their employee pool - as a whole and as individuals - including demographic data and benefit utilization, of course. With regard to benefit utilization, if the data reveals an especially popular voluntary benefit among employees, the employer might choose to fund that particular option, for example. Beyond the benefits context, the same data might reveal employee content engagement patterns and preferences that can help shape future intra-company messaging and communication strategies, both about benefits and other topics as well.
Similarly, an analysis of take-up rates with regard to a given benefit can help employers locate employee engagement gaps. If employees have a low-engagement rate for a particular benefit, that benefit is probably not particularly popular with employees and should be addressed by benefits managers as an isolated issue. If the engagement is more widespread across the benefits package and/or employee population, then the problem is likely more foundational and must be remedied through a larger overhaul including improved communication and education for employees about benefit value. Further, understanding the means through which engagement gaps were bridged with a given employee can potentially be useful in bolstering engagement outside of the benefits context, as well.
Analyzing benefits data can also serve as a detection system that can help employers identify employees who are experiencing financial distress and intervene before the situation worsens to the point that it becomes a bigger problem for both the employee and their employer. One of the first signs of an employee having difficulty making ends meet is their opting out of benefits, especially en masse. By setting up alerts for certain benefit-dropping behavior, employers may be able to discover employees who are struggling and offer them support at a time when they need it most.
Ultimately, by utilizing the data that can be mined from employee benefits platforms, employers have an opportunity not only to improve their benefits packages and the offerings within to better meet their objectives on a near continuous basis, they can also put that very same data to work improving other aspects of their business at the same time - which is a lesson about data that applies well beyond benefit-related data, as well.
You can read more about this topic here.
Artificial intelligences of one sort or another have been quietly increasing their workloads behind the scenes in a variety of industries for years, but 2023 will likely go down in history as the year that AI finally made the jump from a cutting edge technology to a revolutionary one.
While there still seems to be a long way to go before a generalized artificial intelligence that’s capable of seamlessly mirroring human functionality is developed, AI with more specialized uses coupled with processing powers/speeds far beyond human capabilities have already hit the market and are in the process of restructuring operations at companies all over the world.
The insurance brokerage business is no exception, of course, with AI well-positioned to reshape the industry through the automation of many time-consuming tasks, for one, with significant improvements in efficiency already being reaped by the companies that have been early adopters in the AI space.
While much of concern around AI often involves lost jobs and the devaluation of human labor, which are certainly valid fears and can potentially pose significant risks to current business, social, and governmental frameworks (if those systems do not evolve alongside the development of AI in a complementary way), there are of course advantages to be gained for the workers who utilize these emerging technologies beyond the benefits to company bottom lines. For example, insurance brokers who have incorporated AI into their data entry and processing routines have been able to spend more time focusing on establishing and improving relationships with clients.
When considering AI and its potential impacts on the workplace, it’s also important to recognize what AI can not do well, which includes strategic thinking and negotiation skills -especially the kinds based on years of real world experience - and the ability to establish relationships that are based on trust and mutual benefit.
What AI does do well is provide insurance brokers with data-analysis-based insights, roadmaps for streamlined workflows, and automation for the most mundane necessities of the job, giving brokers more time to do the things that they do best and the things that make them successful in their roles.
Some specific ways that insurance brokers have been putting artificial intelligence to work to the benefit of their business are via improved customer service platforms and through increased risk management proficiency, which can both lead to a significant competitive advantage, especially over less technologically-forward competitors.
In terms of customer service, one of the chief advantages AI is able to provide insurance brokerage offices is the ability to respond faster and more accurately than ever before, which leads to increased customer satisfaction, retention rates, and organic business development. Even more, AI has the power to analyze customer patterns, interactions, and behavior to help brokers know what is most important to them and to better identify customer preferences and needs.
On the risk management front, data analysis again gives AI a significant edge when it comes to better assessing and responding to risks. Through processing huge amounts of information and incorporating that data into risk modeling, AI is able to work in a predictive capacity, helping brokers and their clients to identify and minimize threats before they materialize in many cases, including enhanced fraud detection.
Despite the clear advantages that AI can provide insurance brokerage businesses, there are still a substantial number of insurance brokers that aren’t currently utilizing this technology on the job. That said, the number of insurance brokers taking advantage of the opportunities AI provides has grown rapidly in just the last few years, with more than 50% of brokerages expanding plans to use AI over the course of the past few years.
According to a recent survey from PriceWaterhouseCoopers, 86% of respondents consider AI to be ‘mainstream’ technology at this point, which is great in terms of customer comfort and familiarity interacting with this kind of technology especially for customer service support, but it also means the window to obtain a competitive advantage through general AI is shrinking, so there’s no better time than now to start implementing AI into your business processes if you want to gain an edge. Waiting until later just means you'll likely be behind and trying to catch up at that point.
You can read more about AI in the insurance brokerage space here.
Over the last couple of years, employers have been offering more comprehensive and varied benefits packages, which has emerged as a stiff area of competition among companies competing for the same talent in the white hot labor market that emerged as hiring rebounded following the initial economic turmoil at the onset of the pandemic.
As more and more offerings have become available, however, employees have become more likely to overlook some of the potential perks and benefits package components that could be providing significant value if properly utilized. According to research from The Hartford, 70% of employers believe that employees are not effectively taking advantage of the benefits package offerings and perks that the employers are making available.
And how much value are employees leaving on the table with so many benefits flying under their radar? Estimates from the Bureau of Labor Statistics predict that employees could effectively increase their salaries by 30% if they were optimizing the benefits that are already available to them.
With so much additional compensation to be mined, employees would be wise to take another glance at their employer’s benefits offerings with a particular eye toward some of the more commonly overlooked sources of value and/or savings, including childcare and dependent care benefits, fertility benefits, commute/transit compensation, tuition contribution programs, and employee assistance programs (EAPs).
According to one study, about 1 out of every 5 workers is currently managing some kind of significant caregiving responsibility between child care, senior care, special needs care, or some other kind of substantial care giving relationship. While 61% of employers offer flexible scheduling that can ease some of the pressure of juggling work and caring for a dependent, fewer than 1 in 4 companies currently offer childcare support.
In the current benefits boom, however, the number of employers offering these kinds of caregiving benefits is expected to climb to more than 50% in just the next few years, so supply appears to be in the process of catching up with demand.
Some of the ways that employers are stepping in to meet these needs are by reimbursing employee expenses related to childcare, paying third–party childcare providers directly through group enrollment, or even providing in-house childcare for employees on site.
Workers who are paying for childcare - whether out of their own pockets or indirectly through their employers - may also qualify for exemptions from federal taxes up to $5,000 per year.
Fertility assistance and support is another often overlooked benefit that is resulting in employees leaving substantial value on the table unclaimed. Of course, like caregiving benefits, the circumstances particular to each employee will dictate whether or not fertility benefits like IVF, surrogacy, egg freezing, and/or adoption are applicable, but employers are certainly increasing access with 8% to 10% of employers adding fertility benefits to their employee benefits packages each of the last few years, with 40% of employers now making these benefits available as of the latest data.
Commuter perks also offer employers an opportunity to provide tax-free benefits to employees, with the IRS enabling up to $300 per year per employee to cover transportation expenses. These kinds of perks are actually mandatory in many cities and states, and employees can even expand upon the base offerings in many cases by devising their own customized arrangements that include fuel and/or maintenance expenses.
Tuition reimbursement offers a similar tax-free opportunity by allowing employees to claim a maximum of $5,250 per year in educational benefits before educational receipts begin to affect federal income taxes, though workers can still qualify for further financial assistance for education expenses beyond the employer contribution.
Lastly, employee assistance programs, or EAPs, are another great avenue for saving on mental health care expenses. Most programs offer a set amount of counseling sessions that are fully tax-deductible for employers and can save the employees utilizing these services the hundreds of dollars per appointment that each session would have cost out-of-pocket had the EAP not been in place.
Clearly, the underutilization of benefits is causing a lot of employees to essentially forego considerable compensation that they have rightly earned through their work. While not every benefit is going to be equally relevant or available to every employee, that of course is the case with most other employee benefits too. The most important takeaway may be that each employee would be well served to thoroughly survey the available offerings and perks to ensure that they are maximizing their usage of their benefits package in light of their own personal circumstances and needs. Further, employers would be well served to encourage their employees to do so, as the positive effects from offering well-thought and comprehensive employee benefits will be curbed at least if the employees aren’t maximizing that value and fully appreciating what’s being provided.
You can read more about this topic here.
Last month, an employee at JPMorgan Chase made an anonymous social media post that revealed the lengthy expectations the company has in terms of advanced notice when an employee intends to leave their position.
When reviewing the resignation policies in their employment contract as they were contemplating a career move, the employee in question was apparently surprised to uncover the half-year long advance warning in advance of leaving the company that the agreement reflects.
LIMRA put together a graph that displays how much employees value certain employee benefits compared to how important those same benefits offerings are to employers.
The largest gap between how employers and employees rate the importance of various benefits offerings is with regard to career advancement opportunities, which is perhaps intuitive given that employers tend to be more concerned with getting a job done than who is doing it or what their specific motivation may be, while employees often have ambitions outside of the scope of their current work role.
Emergency Savings benefits, with a 19 point gap, and Health and Wellness benefits, with an 18% gap, however, may represent some degree of blindspot in many employer’s perceptions of these issues that they may be well served to address.
You can find that graphic here.
CEO of Raising Canes AJ Kumaran says that it’s not the tight labor market that’s leading his company to make some significant, and innovative additions to their employee benefits offerings, he says it’s just the right thing to do.
Most notable of the new employee benefit package components, perhaps, is the $10 thousand dollars that the company is gifting to first-time homebuyers to help with some of the costs. Raising the minimum wage earned at the company’s restaurants to $18 an hour with opportunities for training bonuses and additional pay for late hour work, as well.
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