Employers are reaching out to plan consultants as more work to offer attractive benefits to enhance the retirement planning experience for participants.
Morgan Stanley’s new 2024 Retirement Plan Survey polled nearly 200 plan sponsors offering 401(k) plans with at least $50 million in assets, along with 56 organizations who have 401(k) plans with over $1 billion, finding that over 80% of employers are currently working with a plan consultant.
The research also showed a growth in the number of 3(38) relationships. While 3(21) partnerships are nearly twice as common as those of 3(38) (55% vs. 27%), Morgan Stanley finds that the gap is slightly closing, with a rising number of plan sponsors highly (6%) or partly (42%) considering working with a 3(38)-investment manager.
Top reasons as to why plan sponsors are switching to a 3(38) investment manager include reduced workload for executives (59%), maximum investment liability transfer under the Employee Retirement Income Security Act of 1974 (ERISA) (51%), and the 3(38) investment manager’s ability to take immediate action for fund changes (50%). Another motive for the switch is the reduction of expenses and/or logistics in recording plan committee meetings (49%).
Of those who are not utilizing or considering a 3(38) investment manager, satisfaction with their current approach was the primary reason. However, Morgan Stanley writes that given the momentum of the 3(38) model, sponsors may become more aware of its benefits in the near future.
Other leading sources for plan sponsors include investment advisors/consultants (47%), recordkeepers (46%), third-party providers (42%), internal staff (36%), and asset managers (23%).
Engaging participants
When looking at engagement resources, employers are relying on online retirement planning tools (85%), online account review and analysis tools (74%), written educational content (73%), video educational content (68%), enrollment meetings (67%), live remote training sessions (52%), personalized financial advice/guidance (50%), and live in-person training sessions (47%).
However, while plan sponsors say they are generally satisfied with these resources, Morgan Stanley finds room for growth when considering the tools’ quality and engagement. For example, 58% of plan sponsors say they are “somewhat satisfied” with the quality of tools and resources available to employees, while 51% are “somewhat satisfied” with how employees are taking advantage of the features.
“Retirement plans are adapting to address both company and employee needs, and our survey results show that it’s not just about improving financial results, but about doing what’s best for the future,” said Jeremy France, head of Institutional Consulting Solutions at Morgan Stanley. “Plan sponsors are looking for a variety of solutions to help them maintain competitive benefits, foster employee understanding and fulfill fiduciary responsibilities, but there’s no one-size-fits-all recipe. Instead, we believe that it’s only through tailored guidance that organizations can find the right blend of support, investment options and education to unlock the full impact of their plans.”
Morgan Stanley’s research emphasizes the need for educational materials as more employees look to also add retirement income tools to their plan. The top three popular tools provided through a 401(k) include online retirement planning tools (85%), online account review and analysis tools (74%), and written educational content (73%).
According to the research, consultants and investment advisors are also now the most common source for participant educational resources, with 47% of plan sponsors turning to their consultants to provide these services. This trend is expected to continue as consultants increasingly incorporate participant education into their offerings, Morgan Stanley adds.
More findings from Morgan Stanley’s 2024 Retirement Plan Survey can be found here.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
