“The single biggest problem in communication is the illusion that it has taken place.” George Bernard Shaw
It’s probably no understatement - getting our participants to pay attention to what we say is probably the single biggest challenge we face. It certainly is the most impactful, because the communication of information is where the rubber hits the road of participant outcomes.
But something even more fundamental precedes communication – engagement.
Develop an outstanding communication piece, but what if no one reads it? Or a great webinar, but nobody tunes in? Or a fabulous group presentation, but no one shows up? The temptation is to focus solely on the message – the brighter, prettier, or clever it is, the more we hope our members will read it. But communication content is only one piece of the puzzle. The threshold challenge is creating a connection between message and audience.
So how do we engage our participants? Think of it like plumbing. Without good piping, the water just spills everywhere. Ditto for communications. Creating real engagement is about answering the member’s essential question - “what’s in it for me?” – in a compelling way.
Easier said than done because not everyone is going to feel so compelled. Offering up a hopeful, secure retirement future is compelling for some people, not so much for others. Providing an interactive quiz that gives the member some other piece of intriguing information (even one not directly related to retirement) or a playful distraction might be far more engaging, and could be just the hook that gets their attention long enough to absorb the rest of your message.
This is what every memorable television commercial tells us. Whatever gets our attention is the engagement piece. The actual thing one’s trying to sell – a product, education, or call to action – is frequently the add-on piece, and often its presentation ends up being more subtle – so as not to detract from the engagement piece.
This might feel like a lot of thinking and work, and it is. But there’s no denying that this can be the most exciting and fun part of what we do. There’s no greater joy than designing a fun, interactive quiz or tool and seeing large numbers of your participants actually use it.
Speaking of engagement, it should be noted that NAGDCA’s “Your Whole Story” campaign for National Retirement Security Week will be receiving an Eddy Award, the prestigious recognition provided by Pensions and Investments. This is quite an acknowledgment, but it also underscores the huge benefits that can result from working creatively and collaboratively on engaging our participants. It’s an emerging focus for our NAGDCA community, as it should be.
Congratulations on our engagement!
2017 NAGDCAST Series
You won’t want to miss the upcoming Perspectives in Practice Benchmarking webinar on February 8 at 1 p.m. ET. This webinar will highlight elements of the new Perspectives in Practice benchmarking survey. Learn from other NAGDCA members how they have used the data and get the scoop on what to expect for this year. Click here
to register today!
NAGDCA would like to thank the sponsors of the 2016 NAGDCAST series. Without their support these events would not be able to take place. Sponsorship opportunities are available for the 2017 NAGDCAST series; bundled conference sponsorships include webcast sponsorship! If you are interested in sponsoring the 2017 NAGDCAST series, please click here or contact Heather Baber at firstname.lastname@example.org.
2017 Conference Sponsorship
NAGDCA invites you to sponsor the 2017 Annual Conference. We appreciate and rely on the generous support of our industry partners. Opportunities to sponsor are limited to NAGDCA industry members. For a complete list of the conference sponsorships, click here.
To purchase a 2017 NAGDCA Annual Conference sponsorship, please sign in using your NAGDCA.org credentials and visit the NAGDCA online store. Please choose the sponsorship level desired and add it to your cart. You may choose to pay by credit card or by check. If you need assistance, please contact Crystal Trimble at email@example.com.
The 2017 NAGDCA Annual Conference will be held September 24-27 in Milwaukee, WI. Hope to see you there!
DOL Clarifies ERISA Exemptions For State-Run Plans
The U.S. Department of Labor (DOL) has finalized a rule providing a “road map” for states to sponsor a workplace retirement savings plan that won’t run afoul with ERISA restrictions, Labor Secretary Thomas Perez announced August 25. Concerns previously arose over whether employers offering state-run plans would inadvertently establish ERISA-covered plans, and thereby open employers up to potential liability, BenefitsPro reported. An existing safe harbor provision allowed employers to establish payroll deductions to IRAs without being subject to liabilities under ERISA as long as an employee’s participation was completely voluntary. But at least five of the eight state-administered plans created in the past two years require automatic enrollment. The new safe harbor established with the publication amends the “completely voluntary” provision to allow states to automatically enroll employees, so long as they have the ability to opt-out. In order for states to require automatic enrollment in state-administered IRA plans, certain provisions must be met for those plans to be considered outside of ERISA’s regulatory domain:
- Mandated participation must be established by state law, and the plan must be administered by the state, though state agencies are allowed to contract with service providers to help administer the plan.
- The state -- not the employer -- must be responsible for investing payroll deductions and selecting the investment options employees choose from.
- The state must be responsible for the security of payroll deductions and employee savings.
- The state must adequately notify employees of their rights under the program, “and must create a mechanism for enforcing those rights.”
In order to qualify for the amended safe harbor, employers may not contribute employer funds to the IRAs and employers’ participation must be mandated by state law. Rather, employers’ roles must be limited to “ministerial activities” such as collecting payroll deductions and remitting them to the state. The final rule also removes a condition in the proposed rule that would have restricted states from limiting early employee withdrawals from savings plans.
Jake O’Shaughnessy is a managing director of SageView’s Portland, Oregon location. As an advisor for the institutional practice, O’Shaughnessy services more than $5 billion in assets across public, private, and not-for-profit defined contribution retirement plan relationships. He has more than 13 years of experience in the financial industry.
The Hidden Treasure for Government Pension Administrators and Former Participants
Much is said about participant engagement and how plans can get them to save more for retirement. In Corporate America, that big push has led to a 401k plan with auto enrollment and auto escalation since the continued demise of the corporate pension plan.
The wave is just starting to reach the shore of the public retirement plans. Collectively, “Government” is by far the largest employer. Governments have made a promise to their employees, in that those who work as a public servant agree to wages slightly less than a private sector job, but in exchange, they would receive a generous stream of payments at retirement. Governments have continued to grow in size, yet their revenue base is relatively the same and investment returns have fallen short of their actuarial assumptions. This has caused governments to add supplemental retirement plans and require employees to begin making contributions to the pension plan. These pension plans are also pushing out vesting schedules from five to eight years, which create fewer benefit eligible employees.
This is creating thousands of terminated employees stuck in their plans for sponsors to try and keep tabs on. The administrators are finding their resources being drawn into researching more for lost terminated employees rather than servicing the active employees and administering their benefits. Since human tendency is to focus on what is easy and to do what we can get accomplished, these terminated non-benefit eligible participants just pile up in the plan. The issue with so many in the plan, the additional time extracting them from benefit calculations and plan correspondence becomes a significant burden for the benefits staff.
There is the other side of the equation and that is the use of the assets to generate income for the trust. With all of these terminated non-benefit eligible participants, their mandatory contribution into the plan has created a windfall for the money managers; they get free use of their former employees’ money to help generate income for the trust and prop up the shortfall in investment returns.
When plan sponsors take up the issue of refunding employee contributions from the pension, usually the money side of the equation wins. The use of the money outweighs the time and cost of dealing with the administrative issues.
Administrative staffs are becoming more overwhelmed by the sheer numbers of terminated accounts in their plans and are starting to push harder on removing these accounts from their plans. They just can’t keep up with the flow of requests and need help.
These sponsors are investigating a little-used piece of the Internal Revenue Code that could be the solution that satisfies the administrative needs and yet retains the assets within the plan. Plan sponsors are starting to amend their plans to add a deemed IRA solution which will allow the plan sponsor to roll all of the terminated non-vested participants into an IRA under the control of the plan. This strategy solves the administrative burden by moving it to an IRA custodian, it keeps the assets under the plan umbrella and it is also in the best interest of the participant, in so much as they are now receiving an annual statement of their accrued contribution balance.
In the end, it’s about doing what is in the best interest of the participant and helping them accumulate a retirement benefit.
Terry Dunne is senior vice president and managing director of Rollover Solutions Group at Millennium Trust Company, LLC. Mr. Dunne has more than 35 years of extensive consulting experience in the financial services industry. Millennium Trust Company, LLC acts as a directed custodian and does not provide tax, legal, or investment advice.
President-elect Trump has been announcing nominees for his cabinet and these include Steven Mnuchin for Secretary of the Treasury and Andy Puzder for Secretary of Labor. Mr. Mnuchin is the CEO of Dune Capital Management and a former partner at Golden Sachs and Mr. Puzder is the CEO of CKE Restaurants which includes several restaurant chains. Neither of them has made any significant statements on pension issues.
The nomination requires Senate committee hearings in the committees of jurisdiction. The goal is to have as many committee hearings as possible completed before the date of inauguration.Doing this will allow the Senate to vote on the nominees on inauguration day and have cabinets filled immediately. However, votes will be delayed until after ethics reviews are completed.
Republicans do not have 60 seats in the Senate and this will make it more difficult to pass legislation, but it is not impossible as 60 votes are needed to cut off debate on legislation. Many pieces of legislation can be passed via reconciliation, which only requires a simple majority of 51 votes in the Senate. There are strict rules for what can be passed via this process, but it is likely most of tax reform can be passed this way.
In the House of Representatives, unlike the Senate, a simple majority of 218 votes can pass any legislation. Additionally, as tax legislation must originate in the House, it is likely that proposals will start being released soon and it is possible that they will be based on previous proposals
Congress is currently funded under a Continuing Resolution (CR) that is set to expire on April 28. Congress has introduced budget resolutions for the remainder of the fiscal year and it is expected those will pass and become blueprints for the remainder of the fiscal year.
The House and Senate Committees on the Budget have also included reconciliation instructions in their proposals and these would allow passage in the Senate by 51 votes rather than 60. The proposals that have been introduced were bare bones budgets and left a lot of discretion to the committees of jurisdiction in the House and Senate to find savings. While the base language did not mention pension proposals, as the committees were instructed to find savings, it is possible pension proposals could be added by the committees.
One issue that the budget proposal does deal with is the repeal of President Obama’s health care reform, the Affordable Care Act (ACA). While the whole bill cannot be repealed under reconciliations rules, significant portions of the bill would fall under these rules.
President-elect Trump has indicated he has interest in tax reform, but no proposals have been released and it is not known if he has interest in pensions as part of tax reform.
There have not been any proposals released that mention pensions as part of a comprehensive tax reform package, but since pensions have been part of almost every proposal released in the last few years it is likely they will once again be included in a tax reform package.
Over the summer, House Speaker Paul Ryan (R-WI) released a tax reform proposal. In it he mentions that the House Committee on Ways & Means will look at the current system, but he did not give any detail on what that may include.
One thing that is known is that there has been interest in combining defining contribution plans and the exemption from the excise tax penalty for 457(b) plans. NAGDCA membership will be informed if these, or other pension provisions, are mentioned in tax reform.