Beyond the "3 F Words"

December 8, 2018 in Advice, Planning

We love to use buzzwords and acronyms in our business.

The 3Fs stand for funds, fees and fiduciary responsibilities. Many plan sponsors have been tackling the 3Fs and feel they’re in pretty good shape. They have prudent fiduciary processes in place. Recordkeeping and advisory services have been put out to bid resulting in fixed pricing structures and lower fees. Fund lineups have been optimized and cost-effective institutional share classes are in place. What is the next frontier? You may want to consider helping your participants improve their retirement outcomes.
The phrase we use for describing a plan that has reached participant outcome nirvana is “90-10-90”. Your goal should be 90% of your employees saving at least 10% of their compensation. Also, let’s get them invested appropriately. We want 90% of those with account balances invested in well-diversified portfolios (managed accounts or models). This is the “90-10-90” goal.

So how are you going to get there?

A good consultant can help. You can also incorporate basic plan design strategies that encourage participation and saving. Automatic enrollment of new employees at 6% or greater, re-enrollment of current participants (defaulted to 6% or greater) and automatic deferral increases to get them to 12% or more are the basic blocking and tackling steps. Put these techniques in place (all are blessed by the Department of Labor) and you will be well on your way to the quest for “90-10-90”.


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