Products October 1, 2015

Investment Product and Services Launches for the Week

New products and services this week include index crediting strategies from Voya Financial and the uptake of PFaroe by NEPC.
Reported by

Voya Offers New Index Crediting Strategy

Voya Financial announced that it is offering customers a new index crediting strategy within the company’s Voya Secure Index series and Retirement Index Select fixed index annuity product lines.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The Voya Point-to-Point Volatility Control Strategy features Deutsche Bank’s proprietary CROCI (Cash Return on Capital Invested) U.S. 5% Volatility Control Index, which provides a dynamic investment option that aims to reduce volatility by allocating between select U.S. stocks and cash. Customers benefit from low spread rates with growth potential, while also receiving a level of protection from downturns in the market, according to Voya.

Voya says the distinguishing feature of its Point-to-Point Volatility Control Strategy is its use of Deutsche Bank’s CROCI valuation methodology. “Using this valuation methodology, 40 of the most undervalued stocks selected from approximately the top half (measured by market capitalization) of the S&P 500 Index are identified and grouped together in a propriety index, which is sponsored by Deutsche Bank,” the firm explains. “This index may provide individuals who select the Voya Point-to-Point Volatility Control Strategy with the opportunity to grow their retirement savings.” 

In addition to offering an alternative to other popular benchmark strategies that are capped, the Voya Point-to-Point Volatility Control Strategy provides upside potential minus a spread rate. A lower spread rate helps customers maximize their investment, while their principal remains protected even with downturns in the market. Customers “can lock in potential index credit gains on an annual basis to their fixed index annuity contract—giving them the benefits of compounding interest.”

NEXT: NEPC Picks Up PFaroe

NEPC Improves Glide Path Customization Capabilities

NEPC has adopted RiskFirst’s risk analytics and reporting platform, PFaroe, to improve the implementation of its customized asset-allocation glide path strategies.

Craig Svendsen, partner and head of the corporate defined benefit team at NEPC, comments: “Many of our clients have customized glide paths for their asset allocations, and PFaroe offers tremendous value in that it can calculate funding status on a daily basis. The result is that we can recognize immediately when certain triggers have been breached, and then make timely asset allocation changes as appropriate. For most of our clients, this means selling assets from the return-seeking portfolio and buying assets in the liability-hedging portfolio, thus taking advantage of opportunities to reduce risk.”

Almost 75% of NEPC’s corporate defined benefit (DB) clients have long duration strategies in their portfolios. In addition, since 2011, 73% of DB plans have developed a glide path with an additional 11% in the process of developing such a solution.

NEXT: MassMutual's new managed accounts

New MassMutual Managed Accounts

MassMutual has teamed up with Envestnet Retirement Solutions LLC to introduce a new managed account service, “providing personalized, professionally managed investment strategies to help participants in 401(k)s and similar retirement savings plans reach their retirement goals.”

Envestnet Retirement Solutions is a registered investment adviser and is the investment manager for the managed accounts. The firm is a subsidiary of parent company, Envestnet, Inc., and is not affiliated with MassMutual.

With RetireSmart Ready Managed Path managed accounts, the participant's retirement account is actively managed by Envestnet “on an ongoing basis to ensure that the investments remain appropriate for the participant's objectives.” RetireSmart Ready Managed Path is designed to help participants who need investment guidance and who may not want to actively manage their retirement investments on their own. The managed account investment strategies are built from investment options already available through a plan sponsor's retirement savings plan.

Employers that sponsor retirement plans administered by MassMutual will be able to use RetireSmart Ready Managed Path in two ways: personalized investment strategies available for selection by participants or as a qualified deferred investment alternative (QDIA) available in plans that automatically enroll employees.

Participants can enroll in RetireSmart Ready Managed Path online through the MassMutual RetireSMART Ready Tool after establishing a separate advisory account with Envestnet, with no other paperwork required. The tool gathers information about each participant's current age, target retirement age, risk tolerance, existing savings and future retirement needs, including whether or not he or she has a defined benefit plan. 

Client Service October 1, 2015

Why Participation Is Low in K-12 403(b) Plans

Employers cite several reasons they think employees don’t participate in their 403(b) plans, but it may come down to employees’ inability to save more.
Reported by

K-12 public schools often offer traditional defined benefit (DB) pension plans in addition to 403(b) plans; four out of five of K-12 403(b) plan sponsors surveyed by the LIMRA Secure Retirement Institute do so.

The survey also found six out of 10 school districts offer a 457 plan along with a 403(b) plan. Many sponsors offer both to try and increase savings rates and give participants the opportunity to save more. But, the most common plan type in the “other” category is a 401(a) plan, which is commonly used for employer contributions.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Getting employees to participate in their 403(b) plans was cited as the greatest challenge by 25% of K-12 plan sponsors (see “Boosting Plan Participation Without Auto Enrollment”). One-quarter of plan administrators think employees do not participate in their 403(b) plans because they are already covered by other retirement plans.

In addition, according to the survey, most 403(b) K-12 plans (72%) do not offer employer contributions, which could cause a drag on participation. However, only 2% of employers cited this as an explanation for low participation rates.

Twenty-two percent of employers cite employees not being able to afford to save more as the primary reason employees don’t participate in their plans. However, LIMRA notes that consumers often cite affordability as a top reason for not saving for retirement, so this may be more of a factor than employers realize.

Other reasons K-12 employers cited for low 403(b) plan participation rates include employees underestimate the cost of retirement (18%), lack of awareness or understanding of the plan (15%) and employees are saving elsewhere (7%).

NEXT: Providers can help with compliance and retirement readiness

Twenty-seven percent of K-12 403(b) plan sponsors surveyed by LIMRA cited staying compliant with or understanding the changing regulatory environment as their greatest challenge, and 23% indicated it was their second greatest challenge.

Smaller plans (less than $5 million in assets) are more likely to be concerned about staying compliant or understanding the changing regulatory environment (77% selected this as a top 403(b) plan challenge). Being smaller, these plans might have a more limited HR staff and rely more heavily on vendors for assistance.

Over 55% of schools agree that employee retirement readiness is an important measure of their retirement benefit success. Six in 10 districts/schools believe their employees will have to work longer to have enough money to retire, and nearly half are concerned about the impact of an older workforce on future benefit costs.

Nearly 60% of schools are interested in working with plan providers to come up with innovative ways to help their employees prepare for retirement. Schools that work more with advisers were more likely to express interest in new solutions (88%), and schools with a single provider are more likely to show interest in working toward new solutions, than are schools with multiple providers.

Only 33% of school districts themselves are looking for new ways to improve employee retirement readiness, indicating that schools are more likely to seek innovative strategies with the help of providers.

The LIMRA Secure Retirement Institute survey was fielded in November and December 2014, and received 124 responses from the Association of School Business Officials (ASBO) membership, Agile distribution list (Agile is an education data vendor), and PLANSPONSOR’s (b)lines newsletter recipients.

«