Plan Sponsors Ask…Q2 2024

Q: Our committee is considering adding a collective investment trust (CIT) to our plan investment menu. Is there any data available showing uptake of CITs by small or midsized plans?

 A: Demand for CITs continues to increase among small and midsize plans, according to a recent report from Sway Research. Defined contribution investment only firms surveyed by Sway estimate that 22% of current CIT sales are generated from plans with less than $50 million in assets, with another 23% coming from plans holding between $50 million and $100 million in assets.

The survey notes that sponsors of these smaller plans are primarily interested in the CITs because they want to take advantage of lower fees and cost savings relative to mutual funds (due to their less burdensome reporting and administrative requirements). For more information on CITs, you can review this FAQ from Putnam Investments (also available at: http://tinyurl.com/3s8fbnk8). 

Q: We added a high deductible health plan option with an HSA a few years ago, but uptake has been slower than expected. Besides promoting it during open enrollment season, is there anything else we can do to better position this benefit with our employees?

A: The Profit Sharing Council of America publishes an annual benchmarking survey of HSAs that offers a great deal of insight into employee engagement. One trend reported in their 2023 HSA Survey shows that more than one-third of plan sponsors surveyed are positioning the HSA as part of a comprehensive retirement savings strategy to employees — up from 27.2% in 2022. In addition, almost half of employers automatically enroll employees in the HSA if they enroll in the HSA-qualifying health plan option. Continually educating employees about the triple tax-free nature of HSAs as well as the availability of an employer match (if offered) should continue to be a key part of your employee communication strategy. Three-quarters of employers make contributions to an HSA (most provide a set amount per coverage level). The Profit Sharing Council of America’s 2023 HSA Survey can be viewed at: http://tinyurl.com/mjjjc2wv. 

Q: Do you have any information or insights regarding employer interest in adopting the SECURE Act 2.0 optional provisions? 

A: According to Alight’s 2024 Hot topics in retirement, just three SECURE 2.0 optional features have most employers saying they are definitely or likely adopting them: the increased force-out limit for vested balances up to $7,000, hardship self-certification and super catch-up contributions for age 60-63. Additionally, at least 30% of employers say they are definitely or likely adding the $22,000 disaster-relief withdrawal, the $1,000 emergency-need withdrawal and $10,000 domestic-abuse withdrawal to their plans.

Alight’s report covers a number of other hot topics, including the importance of financial well-being in defined contribution plans, growing interest in lifetime income products and how employers perceive the success of their employee behavior initiatives. The report can be viewed at: http://tinyurl.com/3ex6nts7.