The employee benefits marketplace continues to evolve, with medical and retirement products continuing to merge. This trend is fantastic for the end consumer. But what is the best way for retirement plan advisers to partner with a benefits broker to serve a mutual client?
If you're not familiar with what benefits brokers do, their responsibilities are very similar to those of retirement plan advisers: They are responsible for assisting with service issues related to medical and ancillary insurance benefits, conducting enrollment meetings and working with clients through their medical insurance renewal, among other things.
One important note: Numerous retirement consulting firms also provide benefits brokerage services (my firm is one of them). Not having this relationship does not mean you can't work with an outside benefits broker as I'm outlining below, but it sure helps.
Let's dive into the ways retirement plan advisers can best partner with benefits brokers to better serve their clients.
1. Make it easier for employees to understand their benefits. In a tight job market, employers need help displaying the total compensation a new hire could earn by working with the company. By partnering with the client's benefits broker, you'll be able to better communicate this via joint enrollment meetings and other coordinated communication avenues.
This may not seem like a ground-breaking concept, but historically medical insurance education (which is what happens during an open enrollment meeting) and retirement have not gone hand in hand. By bringing the two concepts together in one education meeting and structuring the meeting to help employees understand the total compensation they earn (via 401(k) match and employer contributions to the medical plans) employees are better able to see how they can best take advantage of the benefits they are provided.
Given the tight job market, many employers are up for anything that better highlights the benefits they provide and the workplace they are creating.
2. Help with mergers and acquisitions. Mergers and acquisitions are becoming more common — a record number of small businesses were sold last year, according to a report from BizBuySell. The merging or terminating of a retirement plan, if it's not coordinated with the other benefits, can create a mess for employees and the human resources team.
For example, if an employer is going to buy another company in June and plans on keeping those employees on their current medical benefits until January, what should it do with the other company's 401(k)? Terminate it, merge it, keep it around? Combining the acquiring company's strategy around medical benefits with the retirement strategy provides an opportunity to welcome the new employees into the acquiring company with a smooth process of new medical and retirement benefits all at once. If the change isn't coordinated well, the process that may produce more work for the HR team and make the employees of the acquired company feel left behind.
3. Create a more holistic benefits strategy. The total compensation employees receive from benefits is now more than 30%, up from 27% in 2000, according to federal data. By partnering with a client's benefits broker, 401(k) advisers may be able to better identify where that increased benefits spend should go to get a higher payoff for the employer and employee.
The best allocation of higher benefit spend may not always mean a higher employer match. In our joint analysis with our benefits team, we've made the determination on several occasions that a higher employer contribution to the health savings account would result in a bigger payoff for the company and employees longer term than a higher 401(k) match.
4. Provide education on health savings accounts. A Kaiser Family Foundation study found that the portion of workers enrolled in a high-deductible health plan (which is required to use a health savings account) has increased from roughly 12% in 2010 to just under 30% to 2016. Roughly one-third of Americans are now enrolled in a benefit plan that could give them access to an HSA, a fantastic retirement savings vehicle, and most benefit brokers don't have the right background or knowledge to educate employees about this.
With retirement plan record keepers moving to integrate their proprietary HSAs or those of outside vendors into their platforms for the benefit of employees, this is a great opportunity for retirement plan advisers to partner with benefit brokers. Our experience in retirement plans and technical knowledge on how these integrations work are needed to drive better adoption of these accounts as retirement savings accounts.
Those who bring the most value to their clients are most likely to maintain that relationship and add new ones, and using the strategies listed above would do just that.
Aaron Pottichen is a senior vice president at Alliant Retirement Consulting.