The Single Biggest Determinant of Participant Outcome Success
If you want the epitome of a straight-talking, no-nonsense, results-oriented advisor, Marcy Supovitz is it. Don’t ask us, it’s heard (repeatedly) from peers and colleagues, and the reason we’ve wanted to feature her for some time.
It’s also a reason for her overwhelming success in the retirement plan space. But don’t mention airy ideas and vague questions; she’ll call you on it.
“What could you say about this subject that hasn’t been written about a lot already?” the principal of Boulay Donnelly & Supovitz Financial Services bluntly answers when asked about participant outcomes, before launching into a detailed discussion of what—exactly—she does differently.
“A couple of things that I’ll mention are plan design ideas that aren’t talked about much, and issues related to measurements at the participant level,” she begins.
Supovitz recently worked with a company of roughly 3,000 employees that consisted of two very distinct demographic groups.
“One group were primarily software engineers that were well paid, and it was a very competitive marketplace for attracting new hires,” she explains. “The company would have liked to have no eligibility requirements for them to enter the plan. They also wanted to ensure their company contributions were very competitive, especially in the Boston area, so that was one group.”
Split almost 50-50, the company had another group that was primarily young call-center employees with modest annual incomes. As a result, they had a turnover rate of over 25 percent, with many not making it one full year.
“This real difference in demographics is not uncommon, and we’ve had clients in similar situations. For the group with high turnover, immediate eligibility would be a problem, especially with automatic enrollment, because of the accounts created with extremely small balances that employees would then leave behind.”
The solution? A qualified automatic contribution arrangement (QACA) plan design, something Supovitz says isn’t often discussed.
“In a play like this, they clearly needed a safe harbor arrangement because all those young, high-turnover folks are very difficult from a participation standpoint, and it would keep the rest of their employees from being able to contribute what they want. But in the typical safe harbor design, you have 100 percent immediate vesting, so that was a real problem.”
With the QACA, the employer contributions were subject to a two-year vesting schedule, which solved the problem. The company was thrilled, and it had a significant impact in meeting their objectives.
The three major priorities for most companies in plan design, she adds, are 1) a competitive program that helps to attract and retain quality employees, 2) control their plan expenses and 3) the ability to fulfill their fiduciary duties.
“But retirement outcomes really vary in priority company by company, and there’s the dollar and cents aspect of it. Our job as advisors, therefore, is to put a lot of thought into what they would love to accomplish, what would be their ideal set up, and then what’s available from a plan design perspective that could give them the best results possible for the commitment the employer is willing to make.
“And in the background, we’re always thinking about what’s going to most help participant outcomes.”
The single biggest determinant of success, Supovitz argues, is getting employees to participate at an adequate level, and most need help gaining clarity on how much they should contribute and how their money should be allocated.
“I look at raw data in a lot of very granular ways,” she says. “You can sort through it pretty darn quickly to get what you’re looking for. Anybody who’s not contributing enough to get the full match, that’s the No. 1 data point. It’s unbelievable to me how reaching out to those folks and having a conversation—and it doesn’t take long—gets them to the full match. You do it right there on the phone and you don’t let them get away. That’s something we find is very worthwhile to spend time with.”
Marcy Supovitz is principal with Boulay Donnelly & Supovitz Financial Services in Worcester, Mass.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
