Health care benefits have been a big deal lately. I hear the concerns of our corporate clients about how their plans and the industry as a whole will be changing. But there's another benefit that's on its way to getting a complete overhaul that is equally impactful on employees' lives and isn't getting as much attention–retirement benefits.

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The fact, as we all know, is 401(k) plans aren't working. When they were introduced to replace pensions as the more cost effective plan, companies jumped on board. They focused on communicating the benefit, but missed an important component to making them actually work: benefits planning. Today, we're seeing a major shift in benefits packages. They are now including this component which helps employees understand how to manage their benefits in order to reach personal financial goals, rather than just telling them what they have available. Eventually, providers won't be able to sell packages without it.

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Here are some changes that will be put into place:

  • Auto Escalation will become a more regular part of plan design. Setting this up for participants helps them to invest more in their plans without having to deal with paperwork or HR. Participants are also less likely to notice the financial impact of these increased contributions, which means they will be more likely to continue to save.
  • There will be tightening of fiduciary responsibility. As a large percentage of boomers continue to postpone retirement, there will be more pressure on companies as fiduciaries to manage their plans in the most responsible manner. This may include more scrutiny of fund selection, along with the possibility of more lawsuits if participants feel their investments are not being managed well.
  • There will be an increase in target date funds. These funds will make it easier for participants to invest in well diversified portfolios while reducing the likelihood of fund transfers during volatile markets.
  • There will be more emphasis on what providers can offer in benefits planning and plan design. The providers who help clients design their plans will be more likely to win business over providers who don't.

Companies aren't going to go back to using pensions, but they won't be able to just keep offering the same 401(k). Retirement benefits as we know it will need an overhaul–one that helps both sponsors and their employees achieve success.

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