Fine print and refined data took center stage at the Pensions & Investments West Coast Defined Contribution conference, as plan executives learned of ideas and ways to improve participation, increase participant contributions, and protect plans from lawsuits and cyberattacks.
They received advice from fellow executives, service providers, attorneys and researchers during the conference, held Oct. 21-23 in San Diego.
Several speakers encouraged attendees to make greater use of data to improve their plans by better understanding the needs of different segments of their employees and retirees.
"It can't be emphasized enough how important it is to take the pulse" of participants, said Hal Bjornson, client portfolio manager, multiasset solutions for J.P. Morgan Asset Management (JPM), during a session on "Using DC Data Analytics to Customize Plan Design."
Detailed data analysis helped dispel some assumptions about participant behavior, said Phillip Blair, manager of deferred compensation for the San Diego County Treasurer-Tax Collector's Office.
When the county's 457(b) and 401(a) plans exhibited negative cash flow, the county conducted a survey of the plans, which have combined assets of $1.6 billion and 18,065 participants.
Although plan officials had speculated the top reason for the problem would be participants saying they didn't have enough money, the results were quite different. "I didn't know I could" turned out to be the main reason people didn't contribute, Mr. Blair said. "It is too complicated" was the second reason.
As a result, plan executives reworked education communications with a "heavy use of imagery," Mr. Blair said. Since 2014, the percentage of younger employees participating in these supplemental plans has increased substantially.
Mr. Blair found plan information that contained images of county employees, including their names and jobs, spurred greater interest. He noted some employees reported receiving multiple emails from peers, asking about the plans.
Carolyn Wood said she needed to go beyond record-keeping data to get a better idea of how the two defined contribution plans run by Charter Communications Inc. could do a better job for the 90,500 participants.
"How do we help employees with financial wellness" was the reason Charter hired a consultant to help prepare workforce analytics — enabling Charter to identify certain groups of participants so it could conduct pilot projects that, in turn, could lead to broader policies for the plans that have $5 billion in aggregate assets.
The data will help Charter determine, for example, if location or health-care premiums impact retirement savings, she said. Other matters for measurement include hardship withdrawals, the use of health savings accounts and home prices.
"I hope it will result in targeted programs," said Ms. Wood, senior director, retirement benefits, at the Stamford, Conn.-based company.
Read the fine print
Not surprisingly, fine print plays a role in litigation. Sponsors, said ERISA attorney Nancy Ross, could reduce their vulnerability if they increase transparency in describing plan features.
"So much of my work is in accurate communication," Ms. Ross said.
For example, revenue sharing and stable value funds are popular targets for the tort bar. "Stable value funds are a valuable part of the investment lineup," said Ms. Ross, partner and co-chair of the ERISA litigation practice at Mayer Brown LLP, Chicago, in a keynote address Oct. 23.
To reduce the chance of being sued, sponsors must be "as transparent as you can," she said. "Get competitive bids."
The same approach hold true for revenue sharing. "Be transparent and monitor for competitiveness," she said. "There's nothing wrong with revenue sharing."
Fine print plays a crucial role in the field of cybersecurity, most notably when sponsors sign contracts for protection and for cyber insurance.
Margaret Daun, chief corporation counsel for Milwaukee County, told attendees cyber insurance contracts require careful reviews in the relatively new field.
For example, is the insurance capped at a certain amount, she asked during a panel discussion on "Cybersecurity Focus: Protecting The Plan Data."
Other questions sponsors must ask, she said, include: Does the insurance cover cyberattacks against individuals, or the plan members in aggregate? What are the deductibles? What is the cost of credit monitoring and/or the cost of notification of cyberattacks? If a cyberattack is caused in part by a user's negligence, who decides and who pays?
Ms. Daun said Milwaukee County uses multiple tools to thwart hacking, such as conducting third-party reviews of plans covering audits, vulnerability scans and testing if outsiders can penetrate firewalls.
She also noted there are trade-offs when considering how rigorous internal cybersecurity program must be. Easy access for participants increases the risk of cyberattacks, but stricter control could dissuade employees from using a plan's web-based entry point, she said. "What is the appropriate balance?" she asked.
"There has to be a balancing act between security and customer service," added Keith Overly, executive director of the $13.4 billion Ohio Public Employees Deferred Compensation Program, Columbus.
Mr. Overly said his plan, which has cyber insurance, conducts annual cybersecurity audits and quarterly tests of the plan's ability to thwart attacks, and it has developed an incident response plan to know who is responsible for responding to a data breach.
Another look at technology — the kind that can improve participation and contributions — was presented as several speakers discussed improving retirement tools.
"Retirement is not a set-it-and-forget-it journey," said Michael Rosenberg, senior vice president, head of retirement investment solutions, at First Eagle Investment Management. "Engagement is needed to optimize retirement outcomes. Technology can be engaging."
First Eagle is working with the Center for Retirement Research at Boston College to develop technology tools to encourage greater participation in retirement plans.
The goal is to develop technology that's easy to use and works every time, said Mr. Rosenberg during the panel session, "Innovative Retirement Technology Tools to Engage Participants and Increase Retirement Savings."
Technology, he added, should create incentives for participants to return to a sponsor's website, achieve goals or take action, he said.
"Technology will not replace the need for human interaction," he added.
Human interaction was explored by the Oct. 23 afternoon keynote speaker, Hal Hershfield, associate professor of marketing at UCLA's Anderson School of Management.
While praising plan-design strategies such as auto enrollment and auto escalation, he said "there's room for more interventions" as a complement to such changes.
Mr. Hershfield, a psychologist, has studied how people think of themselves in the present vs. their future selves. The research could have implications for retirement plan management,
In one study, for example, Mr. Hershfield said people were asked if they wanted to enroll in a "recurring deposit program" with three choices — $150 per month, $35 per week or $5 per day. The total amount participants would deposit is the same, but 7% chose the first amount, 11% chose the second and 30% selected the third. In this case, the results illustrate peoples' desire "to make the present self feel less pain," he said.
Also at the conference, Karin Brodbeck, former director, retirement investments, Nestle USA, accepted the annual Lillywhite Award, sponsored by the Employee Benefit Research Institute.
Lori Lucas, president and CEO of EBRI, presented the award to Ms. Brodbeck.
"When it comes to creating ways to improve retirement security, we don't need the perfect solution, we need good solutions," Ms. Brodbeck said.
EBRI honored her not only for creating cost-efficient, best-in-class investment options for Nestle participants but also for sharing her knowledge and experience with industry peers.
The award is named after Ray Lillywhite, a pioneer in the pension field, to honor employee benefits officials for their lifetime contributions to economic security.