Products June 1, 2016

American Funds Launches Target-Date Fund Evaluator

It enables advisers to compare glide paths, risks, returns and expenses.
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American Funds has created a new target-date fund (TDF) evaluation tool, Target Date ProView. 

Following the TDF guidelines the Department of Labor (DOL) issued in 2013, it enables users to select up to four target-date fund series for side-by-side comparison of glide paths, risks, returns, expenses, volatility, managers and fund profiles. Designed to be objective, the tool uses proprietary data from Morningstar.

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Advisers can present the TDF data in summary or in detail and create reports that they can share with their plan sponsor clients. American Funds worked to make the tool, which can also be accessed on mobile devices, simple and easy to use.

Capital Group, American Funds’ parent company, recently surveyed 691 retirement plan advisers, sponsors and consultants about their evaluation of target-date funds and found that 66% do a “complete due diligence evaluation” of the TDFs in their plan at least every two years, although the advisers surveyed plan to do this more frequently than the sponsors. More than one third (35%) say they don’t do TDF evaluations more frequently because it “takes too much time” or “is too complex,” and of this group, 66% said they would find a TDF analytical tool helpful.

This is the first time that American Funds has created a TDF evaluation tool, Toni Brown, senior vice president, defined contribution, at Capital Group, tells PLANADVISER. “It came about for a couple of reasons. One was the importance of the DOL tips released in 2013,” she says. “We kept hearing from the marketplace that fiduciaries needed something to help them evaluate TDFs, which are such an important option in retirement plans. The tool is objective and interactive and allows people to get what they need in a simple manner.”

The free tool can be accessed at www.americanfunds.com/proview.

Data & Research May 31, 2016

The Value of DC Plans for Employees

Respondents to PLANSPONSOR's 2016 Participant Survey who work for organizations that offer DC plans were twice as likely to have established retirement goals as employees without access.
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Greater awareness of retirement and financial concepts and a better perception of employer generosity are some of the value employees get from defined contribution (DC) plans, according to PLANSPONSOR’s 2016 Participant Survey.

The survey found respondents working for organizations that offered DC plans were twice as likely to have established retirement goals as employees without access (30.8% vs. 15.3%). The percentage of participants who “don’t know” how much income they need to replace in retirement dropped by more than 40% (from 43.2% to 24.5%) when respondents had access to a DC plan.

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Further, employees without access to DC plans were almost twice as likely to wish their employer offered more financial education at work (66.7% vs. 39%).

The percentage of respondents with more than $250,000 in retirement savings was nearly double for those with a DC plan than for those without (22.9% vs. 12.6%). On the other hand, 60.1% of those without a DC plan reported their retirement savings was less than $50,000, compared to 36.9% of those with a DC plan.

Defined contribution plans also improve employee perceptions as to the generosity of benefits offerings. Employers offering the plans were more than twice as likely (39% vs. 17.5%) to have their benefits described as “generous” or “very generous” as companies that did not offer a retirement plan.

Employers unconvinced of their value might consider this more direct finding: 58.9% of respondents without access to a DC plan were at least “somewhat likely” to participate in such a plan if one was offered.

In March, PLANSPONSOR surveyed 1,035 employed adults ages 23 and older regarding their access to and usage of defined contribution plans. More results from the 2016 Participant Survey can be found here.

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