If you are in the Not-for-Profit Healthcare sector and sponsor a retirement plan, I have some great information for you! Had a broad and interesting conversation with Brodie Wood, Senior Vice President, Not-for-Profit Markets at Transamerica Retirement Solutions. This is the first in a series of industry profile episodes that I will be making over the next several months. On a side note, for this interview I need to temporarily change the title of the site to 403(b) Fridays as many employers sponsor 403(b) plans instead of 401(k) plans in this market. Regardless, several great pearls of wisdom for employers who sponsor a 403(b) or 401(k) plans in this sector can be found below.
1. Market continues to move towards a single provider solution, currently north of 80% have made the transition. Trend has been largely positive for both employers and employees. Benefits have been:
a. Open architecture investment design.
b. Pricing power, economies of scale.
c. Branding focus back on the employer.
d. Streamlined education and communication.
e. Better access to demographic data is allowing more targeted communications to improve participant outcomes.
2. M&A activity is increasing due to changes in the industry. During a potential merger or acquisition, HR needs to be aware of:
a. What type of plan(s) do the target entity have?
b. What will be the future of the acquired plans? Integrate, terminate or run separately.
c. Are there any protected benefits or union groups that could complicate a potential integration.
d. Have discussions early in the process to avoid surprises.
3. Physicians are being integrated back into the hospital systems
a. There is extreme sensitivity around potential loss or reduction of retirement benefits, be sure to plan and communicate well.
b. Physicians may expect special treatment around retirement benefits.
c. Explore 457 or other nonqualified plan options to close a potential benefits gap.
4. Plan Health and Retirement Readiness are replacing participation and contribution rates as the measure of plan success.
5. Hospitals are beginning to explore the financial impact of employees not being able to retire and remaining in the workforce.
6. Not-for-profit healthcare is generally looking farther down the road in the way they look at and evaluate their retirement benefit programs than the corporate market.
7. Employer contribution strategy are generally fixed contributions and moving more towards a “matching” contribution.
8. To encourage higher contribution and savings rates, some employers are exploring a “stretch” match, setting a higher target for employees to receive the full match without increasing the financial obligation to the hospital.
9. Automatic enrollment continues to gain ground, employers are exploring higher automatic enrollment rates to help improve retirement readiness. Additionally, some are reenrolling their plans to pick up participants who are contributing below the automatic enrollment rate or have previously declined enrollment in their retirement plan.
10. Financial wellness continues to expand. Hospitals are exploring and taking steps to improve overall financial literacy and understanding around budgeting, savings, staying out of debt etc. Their efforts are not only improve retirement savings but to help improve productivity, reduce both absenteeism and presenteeism caused by financial stress.
11. Regulatory Thoughts
a. Potential new DOL fiduciary definition could change how providers are able to interact with participants
b. Employers should be aware of how their service providers are interacting with participants.
c. How are retiring or terminated participants being treated or approached about their options with their retirement plan balances.
d. Fee disclosure and allocation of plan expenses will continue to be a hot topic with regulators and litigation.
Click here to listen to my full conversation with Brodie!