Retirement plan providers—specifically, recordkeepers, managed account providers, and plan advisors—collect more detailed participant data than in previous years. In many cases, providers collect participant-level information that comes from the plan sponsor. In other cases, providers collect personal information, such as their individual retirement account balance or information about their spouse or partner, directly from the participant.
Detailed, accurate participant data is a valuable strategic asset for many retirement planning providers, as providers can use this data to create more complete participant profiles, which they can use to provide more effective in-plan advice and financial wellness experiences. German Participant Communications and Messaging, while increasing their value proposition as a plan provider.
Additionally, providers can use these more accurate, complete participant profiles to integrate themselves into participants’ financial lives and establish a more comprehensive financial services relationship with participants that their 401(k) plans keep from keeping records. can proceed. This is especially important for record keepers and planning advisors who provide wealth management or other personal financial services.
The good news for providers is that participants generally feel comfortable giving their personal information to their DC plan provider. Recent survey data from Cerulli’s 2021 Retirement Investor Survey shows that most 401(k) participants are either “very comfortable” or “somewhat comfortable” with regards to their household income, family structure, and non-retirement status. Provide personal information such as savings. The information is being used to personalize their investment advice or financial wellness experience and will not be distributed to their employer.
401(k) participants’ willingness to provide personal data, 2021
Respondents were asked to rate their willingness to provide personal data to their 401(k) provider(s). Respondents were also asked to agree that the data points would be used to personalize their investment advice and financial wellness experience and that the information would not be distributed to their employer.
However, the concept of delivery of non-plan services (likewealth management, retail consulting, banking services) or accounts (like, IRAs, 529s) raises concerns about often inappropriate cross-selling activity for DC participants, which has come to the fore in a recent retirement lawsuit. For example, in July 2021, the Securities and Exchange Commission fined TIAA $97 million for not properly disclosing conflicts of interest related to rollover recommendations between 2013 and 2018. Alternatively, as part of the 2021 ERISA Class Action Settlement, Columbia University has agreed to instruct it. Record keepers will not use participant data to cross-sell non-plan products and services to plan participants (unless the participant requests a non-plan product or service).
On the other hand, there are also cases in which providers were found not guilty of using partner data to market non-plan products and services. For example, in Hormone V. Shell Oil Co., a federal court judge ruled that by using participant data to market non-Plan products and services, Plan’s recordkeeper, Fidelity, was not operating under ERISA in a fiduciary capacity because the court had allowed participant data to be a The plan was not considered property. Therefore, Fidelity could not infringe on ERISA fiduciary duties.
In short, there is no indication from regulators and the courts that retirement plan providers cannot market or raise awareness of non-plan accounts, products or services to DC participants. Instead, providers should determine whether their service agreement with the plan sponsor allows them to sell such accounts, products, or services in the first place and, if so, ensure that they are marketing , or are raising awareness of these accounts, products, or. Services in accordance with any applicable fiduciary responsibilities.
Sean O’Brien leads the U.S. retirement research practice at Cerulli Associates, which focuses on the defined contribution and individual retirement account markets.
