Changing Perceptions of Plan Challenges, Success

A new retirement readiness survey found an increasing number of plan sponsors point to participant outcomes, not gross participation rates, as the best measure of success for an employer-sponsored retirement plan.

Released by Transamerica Retirement Solutions, the “Report on Retirement Plans 2013: The Road to Retirement Readiness” compiled data on both the defined contribution (DC) and defined benefit (DB) plans of U.S. corporations with at least 1,000 employees. In their analysis, researchers found that 41% of respondents said helping employees accumulate retirement income is the primary goal of their plan—a significant jump from the 35% measured in 2012.

Researchers also asked respondents about the challenges they face in meeting retirement plan goals. To that end, 60% of plan sponsors reported “keeping up with regulatory changes” as a primary hurdle to plan success.

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Sponsors also indicated that “motivating employees to save adequately” (55%) and “helping participants invest wisely” (46 %) are primary challenges in the industry. The study found that nine out of 10 plans (90%) reported average contribution rates below the “10% of income” target widely considered to be a best practice. In fact, 46% of sponsors reported an average contribution rate of 4% or less. 

Respondents also suggested that rising health care costs have complicated their attempts to address retirement security.

Researchers used the data to identify ways sponsors are meeting these challenges. Examples of those measures include offering automatic enrollment features, which are currently included in nearly half (48%) of the 401(k) plans managed by sponsors interviewed for the survey. Sponsors can also try streamlining investment options and utilizing online resources that provide access to saving and investing guidance.

To request a full copy of the report, send an email to marketinsights@transamerica.com.

Morningstar to Get New Head of Research

Investment research firm Morningstar announced Don Phillips will step down in January 2014 as head of research. The firm has already named Haywood Kelly as his successor.

Kelly currently works as Morningstar’s head of equity, credit and structured credit research. Phillips will remain with Morningstar as a managing director and continue serving on the company’s board of directors. Both Phillips and Kelly will report to Morningstar founder and CEO Joe Mansueto.

Phillips joined Morningstar as the firm’s first mutual fund analyst back in 1986, two years after the company’s founding. (See “Don Phillips: Legend.”) Mansueto said Phillips will also continue to work closely with his successor, Kelly, to help deliver new research initiatives.

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Phillips is known for helping develop the Morningstar Style Box, the Morningstar Rating and other proprietary innovations used widely across the industry. He has served in a variety of leadership roles in his time at Morningstar and been a member of the board of directors since 1999.

Kelly is also a long-time Morningstar employee, currently in his 22nd year with the research firm. He previously led efforts to expand Morningstar’s equity research coverage, launched corporate credit ratings products and developed the firm’s structured credit unit. He also served as editor of Morningstar StockInvestor.

Kelly holds a Chartered Financial Analyst (CFA) designation. Most recently, he took on oversight of Morningstar’s equity data area.

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