There is no doubt that in the last few years in particular, retirement plan advisers have succeeded in making great strides in
improving plans. More sponsors are automatically enrolling employees; some are initially
deferring participants’ savings at 6% rather
than 3%; a handful are using automatic escalation or stretch matches; and more are actually
looking at the percentage of their work force
that is on track to replace 75% of their income
in retirement. But the fact remains that the
majority of retirement plans are nowhere near
getting people to the right place.
“Power Stance” (page 26) addresses some of
the plan design tools that retirement plan advisers should be promoting to
motivate both sponsors and participants to take their retirement plans seriously, and to get more people better prepared for a comfortable retirement.
If you are not already reaching out to the chief financial officer (CFO) at your
clients, you should be, to champion why it is a smart business decision to get
people on the right retirement track, vs. to have an aging, costly work force
lacking the resources to retire.
The research in this issue covers the defined contribution investment
only (DCIO) market, starting on page 36. DCIO managers command 48% of
the assets in defined contribution (DC) plans, and this is expected to grow to
a 52% market share by 2020. As these investment managers hold much influence over DC plans, we spoke with some of the leading DCIO providers and
researchers about the challenges and opportunities they see in the market.
Several executives believe the penchant for passive investments will wane
in light of expected lower returns and higher volatility in the market. And
a number of executives expect target-date funds (TDFs) will begin to offer
retirement income for investors in retirement. Read what they said in “Up in
the Air” (page 32).
“Shielding Yourself” (page 42) explores the pros and cons of being a 3( 38)
or a 3( 21) fiduciary. As more advisers decide to offer only 3( 21) fiduciary
services, this has allowed those providing 3( 38) services to stand out. Some
plan sponsors like the added protection from a 3( 38) fiduciary, but advisers
need to point out to them that they still have fiduciary responsibilities and
should monitor those 3( 38) services closely.
It is inevitable that retirement plans make mistakes, but, in “Avoidance
Strategies” (page 50), we discuss what the most common ones are and how
you can avoid them. Late deferral deposits and incorrect compensation definitions are two of the most frequent errors.
While defined benefit (DB) plans have long invested in alternatives, DC
plans have begun to embrace them as well. “Seeking Alternatives” (page 52)
explores the types of investments in this strategy that target-date funds are
adopting and how they could benefit participants’ portfolios.
“Expanding Savings Options” (page 46) makes the case for offering a
nonqualified deferred compensation (NQDC) plan for highly compensated
employees, and how that could provide an additional revenue stream for
your practice. We hope you find these stories eye-opening and beneficial to
your work. —Lee Barney, Managing Editor
The Right Place
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