PLANADVISER spoke with three Ascensus executives: Geno
Cufone, senior vice president of retirement administration; Steve Christenson,
executive vice president of health savings and retirement plan services; and
Peg Creonte, senior vice president of business development and marketing for
the company’s college savings division.
Geno Cufone; Steve Christenson; Peg Creonte
PA: What is the savings situation for Americans today, and
how do you, from each of your vantage points, view the success of the current
Geno Cufone: More Americans are saving for retirement than
ever before. We’re seeing a significant spike in the average account balance
held by Americans today vs. 10 years ago: about a 53% increase since 2007.
Steve Christenson: On the healthcare side, when health
savings accounts [HSAs] were approved by Congress in 2003, it created a
valuable tool for savers. We’ve seen substantial growth, allowing people to
begin saving more on an annual basis and to transition to longer-term thinking
about health savings instead of the use-it-or-lose-it flexible spending
Peg Creonte: As the cost of college has greatly outpaced
inflation, families are looking for ways to help them save. Many are turning to
529 plans. 529s came into being when President Clinton signed Qualified Tuition
Plans into law in 1996 and now have assets of about $235 billion as of the end
of last year.
PA: Geno, what do you think is spurring retirement account
growth? And what can you tell us about the movement toward fee-based advising
and zerorevenue- share funds, and Ascensus’ role as an open architecture player
in this movement?
Cufone: Features such as automatic enrollment and automatic
increase are driving overall plan enrollment and getting more employees to
consider a savings strategy.
Access to professionally managed model portfolios and the
availability of target date funds have also helped employees with their savings
strategies. Unfortunately, based on our analysis, less than 40% of savers are
on track to meet their goals—the average American needs to start saving at a
13.5% deferral rate to be on track to do that. Today only about 36% of
Americans are set to meet their retirement goals.
When it comes to fee-based advising and zero-revenueshare
funds, advisers have had to really differentiate themselves from an expense
standpoint. That’s why you see such a trend toward fee-based advisers getting a
greater market share of the plans being sold. More than 70% of the plans that
came onboard last year were sold by fee-based advisers. In addition, more fund
families are introducing zero-revenue-share funds. One year ago, we had 1,400
investment choices that paid zero revenue as a primary selection within
fee-based plans. That has increased to 2,300 investment choices this year.
PA: Peg, how are college savings and 529 plans being used?
Is the market relatively saturated, or is there still room to educate people?
Creonte: 529s can significantly reduce the loan burden of a
family, and can be used for community college, four-year schools, and trade
schools. The vast majority of the withdrawals that go through our platform are
qualified withdrawals—and 70% of the withdrawals are for $5,000 or less. This
means people are actually using these withdrawals for college, but are likely
using them to supplant other sources of funding. On the contribution side, the
majority of our contributions are small dollar contributions; 75% of our
contributions are for $200 or less and 61% are for $100 or less.
There is still a significant percentage of our target
population (parents of children who intend to pursue education after high
school) who aren’t aware of 529s. Those who do know what a 529 is include those
who have parents and grandparents helping them pay for college and who are using
a 529 plan to do so. Those are the people who will be having children and
thinking about how they plan to help their children achieve success. We expect
continued growth in 529 plans and in the number of people saving in those
PA: Steve, how do you see health savings accounts being
Christenson: In the HSA world, you get better participation
when an employer makes the contribution on the employees’ behalf to the
account. When you have and want to retain good employees, give them an employer
contribution. It’s very easy to do: You can just give $100 to every employee to
kick-start the HSA and get them to save directly through payroll. As people are
gaining these balances in their HSAs, they’re saying, “OK, if I have a problem
next year I’m covered.” If they’re disciplined enough to continue to
contribute, they’ll start to see that they’re growing a real balance.
Long term, the HSA can be considered a kind of medical IRA
with triple tax benefits. Current year contributions either reduce your W-2
income if made through payroll deduction or a dollar-for-dollar reduction in
your gross income if you can contribute directly. After age 65, if you use HSA
dollars for qualified expenses, those dollars are tax-exempt similar to a Roth
IRA. For nonqualified expenses, there are no penalties. It simply becomes
taxable income similar to a traditional IRA. As more consumers begin to realize
these benefits, HSA balances will grow into sizable amounts and part of the
PA: What is the intersection of these three priorities?
Creonte: Retirement should be your number one goal because
you can’t borrow for it. You should have a solid plan in place for retirement
before you turn to your other priorities. That said, it can be less than
optimal to save for retirement and then tap into that savings for college,
because there can be penalties and taxes associated with that. If you fully
intend to pay some amount for college, think about how you can work that into
your overall savings priorities.
Cufone: Advisers used to have to help their participants
diversify by getting them across multiple investments. Now, they have to get
the right mix of HSA, 529, and retirement savings to suit a participant’s
needs. Having a savings plan in place for these three needs has become the new
diversification. Each individual will vary, and it will be important for
employers to make available an adviser who can help savers put together the
plan that is right for them.
For more savings trends and insights from Ascensus, visit