Retirement plan reviews: Ignore the noise and carry the tune

Retirement plan review season is once again upon us. For a lot of plan sponsors, it’s shaping up to be a memorable one.

Plan sponsors, if they haven’t already, will soon be getting together with their advisors and administrators to discuss potential changes in their retirement programs for the coming year. As survey after survey has shown, a solid plan with a few perks sprinkled in helps retain and attract talent, offering an organization competitive benefits well beyond the associated costs.

Moreover, the recently passed SECURE Act 2.0 has the entire retirement industry atwitter about the exciting changes it portends. Not just for 2023, but for 2024 and beyond, when a lot of the act’s mandates are scheduled to kick in.

All that said, there’s little doubt that the current round of plan review contributors will spend a significant chunk of their time and energy coming to terms with 2022 before seriously looking ahead to the opportunity that is 2023.

And what a year 2022 was! Stocks were way down. Bonds were way down. Washington, D.C., was weighed down by partisanship. Meanwhile, as all this was going down, inflation was going way, way up to 1980s heights.


None of these extremes could or should be ignored of course. But then again, for planning purposes, sometimes it’s worth taking the long view. 

“Plan sponsors may feel inclined to make decisions on the plan’s investments based on short-term results. It’s important to keep in mind, most participants in a retirement plan have a long time horizon,” said Renee Grimm, senior vice president at Capital Group. “Making investment changes based on a snapshot in time could ultimately lead to institutionalizing losses for participants.”

2022 was also a banner year from a retirement litigation standpoint, with a total of 88 excess fee and imprudent investment cases, the second highest ever, according to Euclid Fiduciary. Plaintiff firms apparently saw last January’s Hughes v. Northwestern decision as a green light to file more cases against actively managed investments in plans’ investment lineups, investments that are allegedly in retail share classes with higher fees than institutional share classes.

Despite the fact that higher fees seemed to open the door to increased litigation, Grimm warns sponsors not to preemptively act — or invest — passively.  

“Don’t assume passive is the safe fiduciary option,” she said. “Don’t step over dollars to save dimes and shortchange the participant’s ability to retire on time, and with dignity.”

Instead, she suggests sponsors assess each fee for the plan as a separate and distinct line item: record keeper, plan advisor, independent fiduciary, third-party administrator, and last but most important, the investments.

Finally, while much ink was spilled last year (including by yours truly) over crypto, ESG and alternatives in retirement plans, none of these items truly were as important for plan sponsors as the Federal Reserve’s rate hikes and the stock market’s nosedive.

“If I’m an employer, my focus is on the here and now,” said David Musto, CEO of Ascensus. “New ideas that don’t have an immediate positive impact won’t be a priority for sponsors,”