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Looking for a way to help your employees save for retirement? Thanks to a provision in the Pension Protection Act, employers can now help workers manage their 401(k)s by offering access to a qualified investment advisor.
The change should help boost plan participation, notes Paul Bracaglia, an investment advisory partner with PricewaterhouseCoopers' Private Company Services, who cites inertia and fear as the primary obstacles to employee enrollment in retirement programs. "Often, employees don't feel confident about making investment decisions," he explains. "Having a fiduciary advisor who explains the importance of putting money away and how to go about it can make a real difference."
But doing right by your employees does come with a potential hitch. Employers who opt to offer advice will be held accountable for their choices of third-party advisors. "You want to be able to demonstrate that you used a prudent process in hiring a fiduciary advisor," Bracaglia warns.
That involves scrutinizing the advisor's accreditation, fee structure and investment methodologies and philosophies. Ideally, says Bracaglia, an advisor would provide an individualized approach, taking into account all of the employee's assets rather than just those in the retirement plan.
Despite these caveats, Bracaglia views the opportunity to offer advice as a step forward. "At some point in the future, 401(k)s will be the only retirement plans offered," he says. "So for public well-being, it's crucial that employers increase participation."
Jennifer Pellet is a freelance writer specializing in business and finance.