Data & Research December 13, 2013

Companies Still Confident in DB Plans

A recent analysis from Russell Investments indicates that some companies still have confidence in their pension plans.
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The analysis, “Did MAP-21 Decrease Pension Contributions?,” examines the impact the Moving Ahead for Progress in the 21st Century Act (MAP-21) has had on companies’ funding of defined benefit (DB) pension plans.

MAP-21 was enacted in July 2012. One provision of the law offers pension funding relief to corporate DB plan sponsors by decreasing mandatory tax-deductible minimum required contributions (MRC).

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The analysis indicates that despite the fact companies were not required to contribute as much to their pension plans as before MAP-21 was enacted, many made contributions higher than the MRC.

In addition, the analysis finds that despite MAP-21 allowing them to delay making contributions for several years, many companies did not exercise this option. This leads the authors of the analysis to believe that companies have a long-term view of their pension plan’s place within their organization, as well as a view that funding would ultimately be required.

More specifically, in reviewing pension funding data listed in companies’ Form 5500 Schedule SB, the authors of the analysis found that 42% of DB plan sponsors elected to contribute above the “pre-MAP-21” MRC, 23% contributed well beyond the MRC (at least 20% more) and 35% paid in line with the MRC or paid no contribution. In addition, the analysis reveals that 31% of plans had no MRC for 2012, but that 60% of them still chose to fund the plan.

“For our analysis, it is likely that many plan sponsors have chosen to fund the pension plan, regardless of the impact of MAP-21,” say the authors.

The analysis was written by: James Gannon, director of Asset Allocation and Risk Management at Russell; Justin Owens, asset allocation strategist at Russell; and Joshua Barbash, asset allocation strategist at Russell.

The full text of the analysis can be found here.

Products December 13, 2013

Great-West Launches Education Website

Great-West Life has launched a website to help employers better educate workers on retirement planning and saving.
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The website, smartPATH 2.0, is presented as a virtual neighborhood that can be customized to reflect the details of each participating employer’s specific group retirement and savings plan. Touch points throughout the site educate employees about their plan while encouraging and facilitating enrollment.

The site is accessible from multiple platforms such as desktop computers, tablets and mobile devices.

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“Many employees are still not on track to achieve adequate retirement income because they fail to participate or fully engage in their employer-sponsored retirement program, even when there is a matching employer contribution,” says Jeff Aarssen, vice president of group retirement services sales and marketing for Great-West Life.

Aarssen says behavioral finance theory has found these decisions are strongly influenced by emotion, psychology and mental shortcuts, with unengaged employees wanting employers to present educational information in more interesting and motivating ways.

“SmartPATH 2.0 was designed using behavioral finance and motivational theory,” he adds. “This approach acknowledges the role emotions play in financial decisionmaking. It provides information in a manner that appeals to a broad range of ages and learning styles, so we can help people make better financial decisions.”

A video about smartPATH can be found here.

Great-West Life is a provider of capital accumulation plans in Canada. In the United States, the company does business as Great-West Financial, a group retirement plan recordkeeper.

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