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The Value of Participant Data

In the tech world, there is an old saying: “if the product is free, you’re not the customer; you’re the product.”  Turns out this was first presented as a concept regarding the relationship between TV networks and viewers way back in 1973.  It’s as true now as it was then! What does this have to do with retirement plans you might ask.  Well, in several recent ERISA lawsuits the use of participant data by a plan’s provider to cross-sell other products and services has been raised as an ERISA violation both by the plan sponsor and by the providers.  To wit: “Even worse,” the lawsuit states, “Shell defendants allowed the Fidelity defendants to use plan participants’ highly confidential data, including Social Security numbers, financial assets, investment choices and years of investment history to aggressively market lucrative non-plan retail financial products and services, which enriched Fidelity defendants at the expense of participants’ retirement security.” We thought it would be interesting to consider the enterprise value of participant data by making some comparisons with the tech and social media giants.  In 2015 a tech blog published these numbers (market capitalization/monthly average user count).  We calculated the 2020 numbers (with some difficulty!). Value of a User 2015 2020 Facebook $158 $246 Google $182 $500 Alibaba $621 $850 Amazon $733 $3,500 What the table

NWPS Perspective: The SECURE Act

Here is NWPS' memo to clients and advisor partners summarizing The SECURE Act and What It Means to Your Plan.  Here are a few key takeaways for those focused on retirement plans: Increases the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½) Allows long-term, part-time workers to participate in 401(k) plans Offers more options for lifetime income strategies Permits parents to withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses   Please contact your NWPS consultant or [email protected] if you have any questions.

A $375MM Illinois Plan Selects Northwest Plan Services

Northwest Plan Services is thrilled to report the successful sale, conversion and go-live status of the Church of the Brethren Benefit Trust 403(b) plan.  NWPS will oversee some $375 million in retirement assets, covering nearly 4,500 participants.  The conversion was particularly demanding as the plan is a Multiple Employer Plan, yet was record kept by Empower as individual plans, limiting needed reporting.  During the conversion, NWPS consolidated the plans into a true, singular defined contribution plan.  The size and scope of the work has piqued the interest of the industry media, including 401kwire.com who reports on the story here.

Wiz Bang Participant Websites Not a Panacea

We couldn’t agree more! Judy Ward’s terrific article in the May/June edition of PLANADVISOR Magazine hits the nail on the head. Entitled “High Tech Meets High Touch,” the article illustrates how thoughtful advisors blend technology and coaching to successfully engage plan participants. Bemoaning the fact that many service providers spend millions on their retirement calculators and participant websites, only to find that less than 20% of participants even log on to their site once a year, Ms. Ward interviewed a number of successful retirement plan advisors to find the balance between technology and touch. James Lyday, managing director of Pensionmark Nashville is representative of the others interviewed for the article. Everyone thinks participants need snazzy feature such as gamification to get motivated to engage. “A customized retirement income illustration is by far the home run to engage people,” says Lyday, a 2019 PLANSPONSOR Retirement Plan Advisor of the year finalist. Indeed, most participants need real help from a trusted advisor in translating their retirement outlook data into an action plan to improve their situation. Based on her interviews, Ms. Ward puts forth four simple ideas for how to blend technology and touch to build participant engagement: demystify the website calculator, narrow the financial

BIG DATA Comes to 401k Plans

It’s no secret that the use of proprietary funds has been on a steady decline for years. As a result, the largest providers (mutual fund and insurance companies) are scrambling for new sources of revenue, including demanding shelf space (or the vaguely worded ‘infrastructure’) payments from fund companies and additional fees to plan sponsors and participants. Enter Big Data. The dominant providers in the 401(k) business (mutual fund and insurance companies) are mining participant data to reveal opportunities for cross-selling other financial products and services. While not a concern to Northwest Plan Services (NWPS), as we are not an asset gatherer and have nothing to sell to participants, this last effort (cross selling) is being examined in a new and significant light. Enter tort terror Jerome Schlichter, the notable protector of participant costs and now apparently, participant data. In the recent Vanderbilt University case, Schlichter and his clients, the participants of the University’s 403(b) plan, claim the University allowed excessive fees to permeate their plan. Plaintiffs then filed an amended complaint accusing the University of failing to protect plan data by allowing their service providers (at the time Fidelity, TIAA and 2 others) to market products and services to plan participants. Vanderbilt recently settled the

Trick or Treat – How does that fund wind up on the platform?

The next time you’re speaking with a 401(k) service provider, ask them how that fund (any of the funds) happened to make it onto their platform.  Is it because that fund has superior investment performance?  Is it because the platform provider or insurance company’s well-heeled cadre of analysts deemed that fund to be investment worthy?  While we’re sure (well