Plan Sponsors Ask...Q3 2022

Q: More and more of our employees are asking about the potential to add cryptocurrency options to our retirement plan investment lineup. What is the current regulatory perspective on this?

A: On March 10, the U.S. Department of Labor (DOL) published compliance assistance for 401(k) plan fiduciaries who are considering plan investments in cryptocurrencies. Published by the department’s Employee Benefits Security Administration), Compliance Assistance Release No. 2022-01¹ cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants. The DOL called it an effort to “protect the retirement savings of U.S. workers” and came one day after President Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets². Part of the order instructs the Federal Reserve to explore the development of a U.S. Central Bank Digital Currency.

Q: We have worked very diligently with our plan advisor to create a comprehensive plan investment lineup that offers diverse, institutionally priced funds to our employees. Has there been any noticeable trend in mutual fund expense ratios over the years?

A: Updated research released last March³ from the Investment Company Institute (ICI) details just how far fees and expense ratios have fallen over the past 25 years. For example, the institute found that equity mutual fund expense ratios averaged 0.47% in 2021, compared with 1.04% in 1996; bond mutual fund expense ratios averaged 0.84% in 1996 and fell to 0.39% in 2021. ICI’s report also shows that in 2021, the average expense ratio of actively managed equity mutual funds was 0.68%, down from 1.08% in 1996. Average index equity mutual fund expense ratios were 0.06%, compared with 0.27% in 1996.

Q: We are thinking of launching a series of financial wellness webinars with a goal of increasing employee engagement with our workplace retirement plan. Is there any recent research on this?   

A: The Employee Benefit Research Institute issue brief, “Field of Dreams? Measuring the Impact of Financial Wellbeing Initiatives on 401(k) Plan Utilization”⁴ summarizes the extent to which the attendance of financial wellness webinars affected 401(k) plan participant behaviors. According to the report, participants’ estimated increase in 401(k) contributions after attending any financial wellbeing webinar was between $649 and $988, depending on age and initial contribution level.

Use of a budgeting webinar was positively related to increased employee 401(k) contributions for all participants. And for younger and lower contributing workers who attended a budgeting webinar, average contributions went up $3,284. In addition, participants’ contribution levels increased after workers used nine of 10 of the webinars.

¹ https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/compliance-assistance-releases/2022-01

² https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/

³ https://www.ici.org/system/files/2022-03/per28-02_2.pdf

⁴ https://www.ebri.org/publications/research-publications/issue-briefs/content/field-of-dreams-measuring-the-impact-of-financial-wellbeing-initiatives-on-401(k)-plan-utilization