Deals & People September 23, 2009

Lord Abbett Exits Small-401(k) Market

Jersey City, New Jersey-based investment management firm Lord, Abbett & Co. announced Wednesday it is getting out of the small-401(k) market to concentrate on its defined contribution investment-only book of business.

Reported by

Simultaneously, Lord Abbett and the Hartford announced a plan to transfer assets from the nearly 8,000 bundled small 401(k) plans comprising more than 59,000 participants and more than $1.2 billion in assets from their current Lord Abbett home to Hartford’s platform.
 
Lord Abbett said it would no longer sell any small-market 401(k) plans to clients effective October 1. The decision was the result of a strategic reassessment of its retirement business, Lord Abbett said.
 
According to the news releases, the asset-transfer pact with The Hartford calls for Lord Abbett to enable eligible 401(k) plans to access the Hartford’s lineup of Aviator open-architecture 401(k) products.
 
The Hartford will also waive transfer fees. The offer includes a waiver of all contingent deferred sales charges (CDSCs) on all A- and C-share plans; the waiver of a plan termination fee; and the waiver of a 2010 billing fee for plans that submit account opening paperwork by April 1, 2010.
 
“The Hartford views its retirement plan business as a significant growth opportunity, and we are actively looking to expand our presence in the marketplace,” said Jim Davey, executive vice president of The Hartford’s Investments and Retirement Division. “We are excited about this strategic alliance and the opportunity for us to provide these retirement plan clients access to our products and new investment opportunities.”


Data & Research September 23, 2009

Automatic Enrollment, Target-Date Funds Still Hot Topics

Nearly half (47%) of employers are now automatically enrolling participants into a retirement plan and another third are seriously considering it, a new survey found.

Reported by

Not only that, but a Watson Wyatt news release about its poll said the number of companies using lifecycle or target-date funds as their default investment option has increased from 38% in 2006 to 62% currently.

Plan sponsors that auto-enroll their employees use a median initial contribution rate of 3%, with a range from 1% to 7%. Fifty-one percent of the plan sponsors that auto-enroll also have auto-deferral increases; the final contribution rate is between 3% and 20%, with a median of 6%.

“Employees need to participate more effectively in their company defined contribution plan as this is increasingly the primary vehicle they use to save for retirement,” said Chris DeMeo, senior investment consultant at Watson Wyatt. “Taking an interest and actively participating in their plans will allow employees to make more informed decisions and develop investment strategies that take into account their goals and risk profiles.”

Stable Value as a Default Option?

According to Watson Wyatt, 96% of responding companies have a default investment option. More than 10% still offer stable value and money market funds as their default (see “Prudential Calls for Stable Value To Be Included as QDIAs” http://www.planadviser.com/Prudential_Calls_for_Stable_Value_To_Be_Included_as_QDIAs.aspx), despite Department of Labor (DOL) regulations issued in 2007 that stated that these options would not be given fiduciary protection.

Other findings of the study include:

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  • Having 10 to 14 investment fund options is most common, but 11% of surveyed employers offer 25 or more.
  • Thirty-eight percent of employers offer company stock as an investment option.
  • Investment fees vary considerably. Most funds (57%) have an average investment fund expense between 0.50% and 0.84%. Larger DC plans tend to pay lower investment fund fees compared with smaller DC plans. Twenty-one percent of the DC plans with less than $100 million in assets have an average investment fund expense of 0.85% to 1.24%, while only 3% of DC plans with $1 billion or more in assets have an average investment fund expense in that range.
  • Twenty-two percent of plans saw a decrease in recordkeeping fee rates from 2007 to 2008, while 31% of plans with more than $1 billion in assets saw a decrease.

Watson Wyatt's survey was conducted in March and April, and includes responses from 149 mainly large companies, representing a total of more than 2 million employees across a broad range of industry sectors.

More information is available at www.watsonwyatt.com/dctrends.


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