As employers and employee benefit plan sponsors create their strategies and approaches for 2019, there are a number of trends of which they should be mindful.
What challenges face the employee benefits world?
When it comes to employee benefit plans, there are many considerations and challenges. Some of the big outside factors currently impacting this area include tax reform, electronic data protection laws, divisive politics, fluctuating markets, and persistently low unemployment.
How are these challenges having an impact in 2019?
- Increased Focus on Employee Well-Being – Despite a growing awareness of the desire for “wellness” programs, many employers are still unclear about how to offer an effective program that goes beyond traditional benefits. Financial well-being programs, in particular, are lagging. Only about half of employers offer financial wellness tools, and even fewer employees take advantage of the offerings.
- Expansion of Auto-Features – More than half of employers automatically enroll new employees into their company’s 401(k) plan. Additionally, in 2018 the Department of Labor (DOL) proposed a rule that would automatically transfer participant retirement balances left behind at an old job—a final rule is expected imminently.
- Combatting High Employee Turnover – Low unemployment means a significant amount of workforce turnover, as employees quit in favor of better opportunities. In order to retain workers, employers need to offer strong, customized and competitive benefits. Some strategies include helping employees pay off student debt and offering Roth 401(k) options.
- Using Cash Balance and ESOPs as an Exit Strategy – With baby boomers retiring in droves, many business owners are turning to defined benefit cash balance plans and employee stock ownership plans to generate liquidity from their equity.
- Shifting Power and Priorities to Congress – 2018 saw the development of both congressional and presidential initiatives seeking to expand 401(k) coverage in the workplace. In the wake of the midterm elections in late 2018, which resulted in a divided Congress, further progress on these initiatives may be slower but will likely still take place.
- Regulatory Progress and Uncertainty – Despite divisions in Congress, the IRS and DOL continue to make progress in implementing changes to retirement plan policies. Items in progress include IRS-proposed amendments for new hardship distribution rules and a revision to the DOL’s fiduciary rule—which was vacated by the U.S. 5th Circuit Court of Appeals in June 2018—in order to make it legal. The Securities and Exchange Commission (SEC) is also active in this area, seeking to finalize a “best-interest rule” that would address the same issues as the DOL’s fiduciary rule.
- Confronting an Evolving Cybersecurity Threat – Cybercriminals continue to represent a large threat. From national legislative bodies down to individual companies, the need to create cybersecurity policies and procedures is greater than ever before. While it’s not possible to eliminate the threat entirely, mitigating the risk can be achieved.
What can employers and plan sponsors do to face these challenges?
Without a doubt, 2019 holds many challenges. From monitoring developments, reducing financial stress for employees, and managing a cybersecurity strategy, to dealing with the fallout of the pullback in equity markets at the end of 2018, plan sponsors have a lot to juggle. In light of this, be prepared to plan ahead and make sure not to lose sight of the big picture as you conquer the challenges before you.
If you have questions about any of these trends, wish to discuss your 401(k), employee benefit plan, or ERISA Audit requirements, please reach out to your WNDE professional or contact us here.