More sophisticated mobile apps and better industry partnerships are being credited with easing access to 401(k) plan information and paving the way for wiser retirement planning decisions.
David Lohre, VP of investment and retirement plan consulting at benefits adviser HORAN, sees a refreshing many websites with a mobile app capability to save plan participants a step when enrolling or deferring their contributions.
“Instead of individuals having to find and download an app, the website recognizes that they’re mobile” once they access it from their smartphone for, he explains. The result is less clutter on their mobile phone and a far more user-friendly navigation compared with a desktop version of the website.
Mindful that mobile apps now power an employee’s digital experience, Transamerica Retirement Solutions, LLC introduced TRSRetire to help plan participants better gauge their retirement outlook and enact transactions.
Another unusual capability is known as the ART app, which stands for Augmented Reality by Transamerica. Introduced in the middle of 2015, it allows participants to hold their mobile device up against a poster or other visual in a break room with a code that instantly launches a video encouraging action, such as increasing their deferral rate. The aim was to offer a novel approach that would be more effective than sending a traditional e-mail to participants, explains Jason Crane, EVP and managing director for retirement sales at Transamerica.
“What we are trying to do is to enable them to get a better depiction of their current retirement state, and what behaviors are required to enable them to improve their outcomes, and then to act upon that guidance using the mobile application,” he says.
Charles Schwab also recently added to its suite of mobile apps a transaction capability and one-click-enrollment option for faster service. In addition, customers have access to an online hub of videos and articles called My Learning that’s delivered in short snippets. Much like Yelp, it allows plan participants to rate content to help guide their peers to the most helpful materials, which helps plan sponsors measure the type of page views.
The push for automation has made payroll companies more willing to partner with 401(k) providers and instantly share employee data from the date of hire, says Karl Diebold, another VP of investment and retirement plan consulting at HORAN.
"“From my point of view, it's important that brokers stay in touch now with these ecosystems that are developing and be aware of the different combinations of benefits technology."
“Employees just go online, set up their contributions, and then the 401(k) provider automatically sends that straight back to payroll,” Diebold says. Not only does it streamline the process, he adds, but it also helps with compliance and census data that payroll companies feed to plan providers all year.
While the use of auto enrollment is up about 28% from 19% five years ago, according to Diebold, not enough is being done to move the needle on the auto-escalation feature. “Many employees stay at whatever the default rate is five years later,” he notes. “We’re still suggesting to employers the 6% default is a great first step, but you really should think about having an auto increase up to at least 10%. Then in a couple years, employees are deferring 10%, plus that hypothetical 3% match, and you’re in that 13% range.”
Crane believes that beyond making mobile apps available to their customers, brokers and advisers can help encourage plan sponsors to “stretch participant deferrals to 8%, 10% or 12% of pretax income rather than maxing out on matching contributions at thresholds of 3%, 4% or 6%.” His larger point is to “help them understand how what they adopt actually drives better outcomes for participants.” To that end, Transamerica’s 401(k) plan pricing is actually based on average annual deposits contributed into the contract each year rather than average account balances.
“We are unique in allowing our customers to benefit financially from adopting provisions like automatic enrollment, automatic escalation and matching contributions,” Crane notes. The upshot for advisers is “the more assets in the plan, the more most of them stand to make in the form of compensation,” he adds.
As online access to 401(k)s evolve, producers can help lead their employer clients through the process. “I think the role of an adviser is to find best practices, look at actions and outcomes, see what works and doesn’t work, and relay that expertise back to the client so they can evaluate that information and incorporate it in their plan,” Lohre opines.
He says the focus in recent years has shifted from keeping tabs on account balances to designing plans to better meet an individual’s unique retirement needs. “Through plan design, we can draw some of those conclusions and get people saving at a rate that's meaningful to retire when they want,” he observes.
Trends in the 401(k) space certainly square with the rise of robo advisers, observes Dave Gray, VP of client experience for Charles Schwab’s 401(k) business. He notices advisers evolving from managing the plan fund lineup to actually managing participants’ accounts with personalized and professional advice, “and technology is making that possible for advisers to do in a very scalable, integrated and flexible way.”
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Late last year, Schwab launched adviser managed accounts for 401(k) plans that allow producers to build out custom portfolios for plan sponsors and brand their own service to the solution. The technology platform helps advisers assign plan participants to portfolios based on about 10 data points that include salary, savings rate, Social Security and state of residence.
Changing technology is also helping remove labor-intensive barriers to small businesses setting up and maintaining 401(k) plans with the simple click of a mouse. For example, online payroll companies and others providing HR and benefits technology in this space are now creating ecosystems enabled by application programming interfaces.
This allows disparate platforms and different vendors “to communicate a little bit more easily and share the small-business customers’ census and payroll data on behalf of that customer,” reports Craig Howell, VP of business development at Ubiquity Retirement + Savings.
While Howell’s firm helps get 401(k) plans into the hands of more small businesses, he also works closely with benefits brokers and investment professionals, whom he considers an important distribution channel.
“From my point of view, it's important that brokers stay in touch now with these ecosystems that are developing and be aware of the different combinations of benefits technology now that can help make things like adopting a 401(k) plan really easy,” he says. “And in the end, my goal is to allow the broker to help raise awareness at the employer, and in some instances where desired, at the employee level, to encourage people to adopt and invest in the plan.”
