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Retirement Planning > Retirement Investing

Retirement Plan Reviews Fail to Focus on What’s Important: MassMutual

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Only one in four retirement plan sponsors reviews its plan to determine whether employees are actually saving enough to retire, according to a study from MassMutual Retirement Services.

“This points to a missed opportunity on the part of both advisors and sponsors,” Tom Foster Jr., spokesman and practice management leader for MassMutual Retirement Services, said in a statement. “We need to focus more on the effectiveness of the retirement plan and educational programs to help ensure that working Americans are saving enough to retire on their own terms.”

MassMutual’s study polled 565 employers that sponsor retirement plans – including 449 that worked with an advisor and 116 that did not – to examine how often retirement plans are reviewed and what factors they prioritize during reviews. These plans had retirement plan recordkeeping assets ranging from less than $1 million to as much as $75 million.

The study found that during plan reviews, sponsors prioritize satisfaction with their plan provider, performance of investments, and fees associated with the plan more so than the effectiveness of education, the participation rate, and whether employees are saving enough.

The study also finds differences in focus between sponsors with an advisor as opposed to sponsors without an advisor.

Sponsors who work with an advisor typically prioritize satisfaction with their plan provider, according to the study. Meanwhile, sponsors without an advisor prioritize fees and costs.

The study also finds that performance of investments is more important to sponsors with advisors – 76% said this was a major consideration, compared with the 59% with no advisor. Also, effectiveness of education and advice is significantly more important to sponsors with advisors, with 50% saying this is a major considerations versus 31% of sponsors with no advisors.  

“Advisors can do a world of good to help employers focus on savings, the effectiveness of education programs, and perhaps the ultimate metric: whether their employees on target to be retirement ready,” Foster said in a statement. “Participation in the plan is certainly important too. But if every employee participates but each saves only 1% of his or her salary, it’s totally ineffective as no one will ever be prepared to retire.”

The study also finds that reviews of 401(k)s and similar retirement plans should be more frequent, and many plan sponsors say they want to review their retirement plans more often than they currently do.

Nearly three in five (57%) plan sponsors want advisors to help them review their retirement plans semiannually or more often, something that only 44% of sponsors report currently takes place, according to the study.

Sponsors who rely on advisors typically review their retirement plans more often than sponsors who do not use an advisor, according to the study.

“Frequent, focused plan reviews are essential to assess the ongoing effectiveness of a retirement plan and to help ensure that plan participants are saving enough to retire when they reach their traditional retirement age,” said Foster in a statement. “It’s a clear opportunity for financial advisors to improve and build their retirement plan practices.”

According to Foster, plan reviews can lead to improvements such as new plan designs to better meet an employer’s objectives.

Any improvements to a plan should generally start with a careful review and include consultation with the plan’s legal counsel and other experienced advisors, as appropriate, Foster said.

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