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Season 2, Episode 19: CARES Act: What Employers Need to Know with Emma Tookey

Elliot Kallen brings on Emma Tookey, Senior Retirement Sales Executive, of T. Rowe Price. T. Rowe Price Group, Inc. is an American publicly owned global investment management firm that offers funds, advisory services, account management, and retirement plans and services for individuals, institutions, and financial intermediaries.

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Welcome to Season 2, Episode 19 of Meet the Expert® with Elliot Kallen!

Elliot Kallen brings on Emma Tookey, Senior Retirement Sales Executive at T. Rowe Price, to discuss the latest developments in the 401(k) space, the Fiduciary duties of Trustees and Administrators, and what it’s like to be a woman working in a male-dominated industry.

Listen to the podcast here

Meet Our Guest

Emma Tookey T Rowe Price Senior Retirement Sales Executive

Emma Tookey

Senior Retirement Sales Executive, T. Rowe Price

In her work with retirement plan advisors and consultants in Northern California and Northern Nevada, Emma challenges her clients to think differently about their approach to the retirement planning business — to go beyond fees and funds in order to win more business. She brings deep industry knowledge to her business relationships, including expertise in the nonprofit 403(b), 457(b), and 457(f) markets and helps advisors bring outstanding solutions to employers and their employees for their small and medium 401(k) plans. T. Rowe Price is a retirement plan platform for smaller businesses with $500,000 to $15 million in assets.

There have been lots of changes to 401(k) rules and regulations in the last 12 months. What do Trustees and Administrators need to know right now?

Elliot Kallen (EK): There are all types of laws that have passed with the Small Business Administration’s Paycheck Protection Program allowing participants the ability to take a loan from their retirement plan. A third of our clients have adopted these changes, and a third of our clients have chosen not to adopt these changes. The rest are undecided. We’re also hearing from the majority of Administrators and Trustees that they are not getting any advice from their Advisors, but instead, are hearing about these changes from their platform.

As it turns out, advice seems to be scarce in our industry. Our job is to keep the Trustee and Administrator up on their game, and we do that by giving them advice and meeting with them in a timely manner.

From your point of view, what should Trustees and Administrators be doing to adapt to these recent changes in legislation?

Emma Tookey (ET): We’re in unprecedented times. Nobody who is in the workforce today has experienced a global pandemic — nothing like this has happened since 1918. So, it’s a whole new world. Everything has changed.

At T. Rowe Price, 96 percent of our employees are working from home. That’s the same for employers across the Bay Area, across the country, and across the globe.

So, how does that relate to the 401(k) plan?

As everybody knows by now, the CARES Act is the biggest piece of 401(k) legislation that has come out of COVID-19. We’re seeing very similar numbers to what you shared, Elliot — that is, a low uptake of some of these provisions.

One size does not fit all. Different industries are being impacted differently by this. 14 percent of smaller employers, or those with less than 100 employees, are adopting some of the CARES Act provisions. At T. Rowe Price, we aren’t taking a one-size-fits-all approach; we’re letting employers work with their Advisors to figure out which provisions they actually need. We’re finding that most employers are not selecting all three provisions — most are only adopting one or two.

That’s smart, because although people are experiencing negative financial impact during these difficult times, the 401(k) is your retirement plan savings vehicle. This is a long-term savings vehicle. It really ought to be one of the last places you go to if you need access to more money.

That’s one of the advantages of working with an Advisor team like Prosperity. Advisors work directly with employees to figure out their options before dipping into their 401(k) funds. And if it does come down to tapping into 401(k) assets, what’s the best way to do that? Is it a distribution or a loan?

The CARES Act has made that access easier, but we need to be mindful of not opening the floodgates and making sure that employees are fully informed before tapping into their 401(k).

What are the Fiduciary responsibilities of Trustees and Administrators?

EK: We are a Fiduciary Advisory Firm, so we want to keep everybody on top of their game and make sure they’re following best practices. What are the best practices that Trustees should be following?

ET: The basics haven’t changed. We need to continue doing retirement plan investment reviews, ensure that there is an Investment Policy Statement in place for the plan, setting forth the criteria you need to select and monitor your funds, work with an Advisor who is putting their name on the dotted line for selecting and monitoring those investments funds, continue to have an education policy in place, put out an education program for your employees…

We should leverage this virtual world that we’re in. There is so much technology available to us. Don’t postpone those meetings — you are a Fiduciary, so you need to continue having these investment reviews. Do them virtually if that’s what needs to be done.

In terms of new considerations — when you’re going through these 401(k) plan reviews, it’s important to understand the business continuity plans of your partners. What’s the business continuity plan at your company? Who is your Recordkeeper and Administrator? These are all Fiduciary responsibilities of Trustees and Administrators.

With so many new employees working from home, data security is a big issue…

EK: At T. Rowe Price, what are the data security measures you have in place?

ET: We’ve always had a robust data security program and theft prevention program, so we were well-prepared for this ahead of time. We just launched Voice Recognition and Pin Drop technology — when a participant calls into the call center, we’re paying attention to where that number is geolocated.

If you usually call me from a San Ramon phone number but suddenly I receive a call from Pennsylvania, our Pin Drop technology will flag that location.

And unfortunately, most fraud attempts are made by someone you know — someone who would know your maiden name or the city you grew up in — so that’s where Voice Recognition technology comes into play. It recognizes that someone who doesn’t sound like you is calling on behalf of you and flags that phone call.

We also have a fraud protection program — it’s essentially an insurance program. If Plan Sponsors and their employees are following best practices for data security (e.g., not sharing passwords), we will restore accounts in the event of fraud.

We’ve focused on leveraging similar technologies, and as of today, we’ve never had a successful security breach.

What should Trustees and Administrators be asking of their Advisor and of their platform?

EK: Trustees and Administrators are required to do an Annual Review to review the costs of investments, platform, fees, and investment performance. What should Trustees and Administrators be asking of their Advisor and of their platform? Do investment fees matter all that much? And now that we live in a volatile world, should we be adjusting investments on a regular basis?

ET: When we talk about 401(k) plans and 403(b) plans — we’re talking about long-term savings vehicles. When you’re looking at the investments in an investment review, you need to look at the long-term performance of the investments. We’re seeing a lot of short-term volatility right now, and it’s hard not to pay attention to the pandemic, but it’s the strength and stability of a fund in the long-term where the proof is in the pudding. No portfolio manager could have planned for this global pandemic and the impact it has had on our markets.

In evaluating the performance of a mutual fund, look at our last major economic shock in 2008-2009. How did those investments recover after that financial crisis? Investors should be careful about locking in losses by making emotional decisions due to this current volatility.

When it comes to investment expenses, cheaper does not equal better. We have been in a 10-year bull market up until now, and as a result of that, we saw a huge trend toward indexing — low-cost funds — and there is a place for that. But when you’re putting together a 401(k) investment menu, diversification is key, so you want to have low-cost indexes and actively managed funds.

Actively managed funds will cost more because there’s an active portfolio manager and team of analysts working to make tactical and strategic decisions, versus a low-cost index fund that’s purely following a benchmark. And at most companies, there are employees who want funds that have a portfolio manager and a team that’s actively working to heighten performance net of fees.

What is prudent is having a well-rounded investment menu with low-cost funds and actively managed funds.

Why should Trustees and Administrators consider T. Rowe Price for their 401(k) platform?

ET: We’re very financially strong and stable — we are one of only 15 S&P 500 Companies who have zero debt on our books.

We also have $3.5 billion in cash on our balance sheet. Right now, in these volatile and uncertain times, you want a stable business partner on your retirement plan. T. Rowe Price has zero plans to furlough or lay off employees, so service will not suffer because of the pandemic.

We have a 97 percent client retention rate, which is one of the highest in our industry. In terms of Net Promoter Score, which measures customer experience and loyalty, we have a Net Promoter Score of 79 versus the industry average of 58. We have the highest NPS out of all our 401(k) Recordkeeper peers.

The top 3 reasons that I hear from clients for selecting T. Rowe Price as their 401(k) Provider are:

  1. When we have the opportunity to meet, present, and introduce our service team, people pick up on the fact that we customize our services around their needs.
  2. Financial strength and stability
  3. Our investment flexibility — we have thousands of investment options on our platform, not just T. Rowe Price funds.

On a personal note, what is it like to be a woman in an industry that’s male-dominated?

EK: You’ve been working in the wholesale industry as a Vendor for quite some time. And you’re one of the few women who we work with in this space. Congratulations to T. Rowe Price for hiring you — in a male-dominated business, you shine on your own. How has this been an advantage for you?

ET: I always joke that working in the Navy equipped me very well to work in the Financial Industry. I’ve spent my entire adult life and working life in male-dominated industries. Luckily at T. Rowe Price, the company is diverse and we have a sizable proportion of women in sales, as opposed to the industry average.

When I think about the Retirement Plan Industry, I think about how closely I get to work with another female-dominated industry — Human Resources. I do think there is a natural connection that can happen with other women in HR. However, I think it’s important to remain confident and maintain integrity in all that you do, and bring your best self to the table.

Meet the Expert

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If you’d like to learn more about any of these topics and how it affects your finances– contact me today.

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