SmartRetirement Blend keeps the overall
asset allocation and glide path design of SmartRetirement target-date funds
(TDFs), while incorporating the selection of some passive investments for fee
efficiency.
The funds are designed to give strong
risk adjusted returns over market cycles, with the goal of getting as many
participants to a minimum wage replacement threshold as possible at the point
of retirement.
Diversified strategic asset allocation, grounded in
participant behavior research;
Underlying manager selection screened from J.P.
Morgan’s platform of 240-plus investment strategies for alpha delivery
with low correlation to other underlying strategies. The funds leverage
this process to incorporate passive investing in multiple asset classes,
including domestic U.S. equities; and
Tactical asset allocation helps the fund series
position for market inefficiencies and relative value opportunities.
“Plan sponsors are increasingly
sensitive to fees, yet simultaneously take their fiduciary duty very seriously
in seeking the most suitable investment options for their participants to help
improve retirement outcomes,” said Daniel Oldroyd, SmartRetirement portfolio
manager in J.P. Morgan Asset Management’s global multi-asset group (GMAG).
The fund’s management team, overseen by
Anne Lester, is part of a multi-asset boutique within J.P. Morgan.
By using this site you agree to our network wide Privacy Policy.
According to Diversified’s “Report on
Retirement Plans 2012: Bridge to Your Retirement Success,” while having a high
participation rate is still viewed as the best indicator of plan success, its
significance is falling. In 2012, 52% of plan sponsors believe
participation rate is the best indicator of plan success–down from 58% in
2011. During this same period of time, the number of plan sponsors
selecting average deferral rate as the best indicator of plan success climbed
from 14% in 2011 to 20% in 2012.
Nearly all large corporate plan
sponsors (95%) offer a fixed or discretionary employer contribution. Among
those who offer a fixed contribution, 84% use a matching formula. The two
most common matching formulas are dollar-for-dollar on the first 5% to 6% of
pay (20% of plans use this formula, up from 11% in 2011), and fifty cents on
the dollar on the first 6% of pay (17% of plans use this formula, up from 15%
in 2011).
More than half of all large corporate
401(k) plans (53%) offer financial advice, and an additional 33% are
considering adding this to their plan’s offering. The use of automatic
enrollment and automatic deferral increases is also growing. Forty-five
percent of large corporate 401(k) plans sponsors have implemented automatic
enrollment and 40% are considering implementing this feature.
Automatic deferral increases have been
implemented by 30% of plan sponsors, and an additional 43% are considering
adding this feature in the future. However, among plans taking advantage
of automatic enrollment, 58% enroll participants at a default deferral rate of
3% or less–far lower than the 6.7% average deferral rate for self-enrolled
participants.
The percentage of employees at large
corporations participating in their employers’ 401(k) plans remains unchanged
since 2011 at 69%; and the average deferral rate dropped sharply from 8.8% in
2011 to 6.7% in 2012. With deferral rates falling, 56% of plan sponsors
report that motivating employees to save adequately is “extremely” or “very”
challenging, which surpassed keeping up with regulatory challenges (52%),
helping participants invest wisely (43%) and meeting fiduciary responsibilities
(38%).
According to Diversified’s report, 95%
of all large corporations offer a 401(k) plan (all offer some type of DC plan),
and 80% offer a DB plan. However, evidence that many sponsors are likely to be
terminating their defined benefit plans is widespread–only 42% of defined
benefit plan sponsors state they are likely to continue to offer defined
benefit plans to all employees during the next five years. Thirty-five percent
expect to continue to offer DB plans to existing employees but not new
employees, 13% are likely to freeze active DB plans, and 10% believe they will
terminate active DB plans during this period of time.
Thirty percent of all DB plan sponsors
indicate the plan’s impact on company financial statements is their primary
concern, narrowly edging out the financial health of the DB plan, which was
singled out by 26% of all sponsors. Other top concerns include the
company’s long-term commitment to the DB plan (15%), investor concerns about
the plan (14%) and employee appreciation of the plan (12%).
Other highlights from the report
include:
Nearly half (45%) of all DB plan sponsors have created
a DC plan as a DB plan replacement.
Fifty-three percent of large corporate plan sponsors
use an adviser–a trend that is likely to grow, as 19% of plan sponsors
have plans to hire an adviser within the next 12 months.
On average, large corporate 401(k) plans offer 13
investment options in 2012–up slightly from 12 options in 2011.
Seventy-six percent of large DC plans offer investments
that are proprietary to the service provider.
Across all large corporate plans, the benefits budget
allocation for all retirement plans (DC plans, DB plans and nonqualified
deferred compensation plans) is nearly equal to the health care budget,
with 34% dedicated to retirement plans and 32% to health care.
Just 20% of all plan sponsors believe participants
understand their plan’s fees “very well.” Forty-six percent state
participants understand fees “somewhat well,” and 34% report that
participants do not understand the fees.
“The Report on Retirement Plans 2012:
Bridge to Your Retirement Success” survey was completed in the second quarter
of 2012 by more than 270 individuals responsible for the administration of
retirement benefits in a company with more than 1,000
employees.