Retirement Plan Sponsor Q & A - Second Quarter 2018

June 26, 2018

Q: There are a few accounts in our 401(k) plan that belong to people we can no longer find. They moved and didn’t give us a forwarding address. We plan to terminate our plan, which makes it even more important that we find these “lost” participants. What can we do?

A: The Pension Benefit Guaranty Corporation (PBGC) may be able to help. Although the PBGC is primarily about safeguarding DB plan benefits, they said in December 2017 that they will now grant access to their missing-participant database to defined contribution plans terminating in 2018 or later, and to affected participants. That’s good news for you and others with terminating plans, but unfortunately it does not address unlocated participants from ongoing plans. Beginning January 1, 2018, sponsors of terminating DC plans may transfer the accounts of “lost” participants to the PBGC, rather than to a financial institution IRA. The accounts will not be diminished by fees, and instead interest will be paid on the account balance when the participant is located. By having a central location for participant accounts, it is expected that it will be easier for participants to find their money. Read more here

Q: We are considering adding auto-enrollment to our 401(k) plan, and have seen many reports about the benefits of doing so.  We just fear that our employees may find it to be too heavy handed of an approach.  How do we overcome that hurdle?

A: Let’s start by saying that the upside of using auto-enrollment (and auto-escalation) features in a 401(k) plan are considerable. Participants in plans that use auto-enrollment seldom opt out, even when they are enrolled at 6%-10% of pay. This has resulted in many new participants saving for their futures.  But what do employees tend to think about it, especially if considering adding it for the first time?  Well, a 2016 study by JPMorgan aimed to find that out.  Of the participants surveyed, 75% of them responded that they would be in favor of, or at least neutral towards automatic enrollment.  Even more interesting than that, 82% would be in favor of or neutral towards a re-enrollment (an automatic enrollment “sweep” of non-participants).  And when broken down by age, participants 30 years and under were even stronger proponents of automatic features.  Perhaps most important though, of participants who were automatically enrolled, 31% say that they would not have enrolled otherwise.  So while there may be a fear that employees may react negatively to automatic plan provisions, the data seems to suggest that employees may actually appreciate the push to help them

Q: We are thinking about improving our financial education for employees, in hopes that it will have a positive effect on savings rates. The problem is finding topics that interest our employees. What are other companies doing?

A: You are right that general financial education, in additional to education specific to the 401(k) plan, can encourage employees to save more for retirement. Topics like budgeting, debt management and reduction, and finding ways to save on household purchases may allow employees to feel more confidence in contributing more of their income to the plan. In turn, that can lead to improved retirement readiness. It’s wise to consider employee interests when selecting topics, because there is some disconnect between what employers think is important for employees to know, and what employees really want to know. For example, 81% of employees want more education about how to obtain life insurance, but only 68% of employers thought they would. 47% of employees want to know about saving for children’s education, compared to 24% of plan sponsors. And refinancing or paying off student debt is on the minds of 46% of employees, but just 18% of employers said it was important. You might consider an employee survey to identify the financial topics that are truly on the minds of your employees. That way, you may get greater participation in the sessions—as well as in the 401(k) plan. 

For more information about future retirement planning or any general questions about 401(k), contact your local MMA Financial Services Consultant at (800) 444-3033.


MMA Upper Midwest is a part of Marsh & McLennan Agency LLC (MMA). Securities offered through MMA Securities LLC (MMA Securities), member FINRA / SIPC, and a federally registered investment advisor. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Variable insurance products distributed by MMA Securities LLC.  MMA and MMA Securities are affiliates owned by Marsh & McLennan Companies.