Participants May Be Overlooking Appropriate Investment Options

Findings from a survey by TIAA-CREF suggest retirement plan participants may be overlooking important options that could benefit them.

Nearly four in 10 participants (39%) surveyed for the TIAA-CREF 2015 Investment Options Survey say they are not familiar with their retirement plan investment options—an increase from 33% in 2014. Yet, the vast majority of respondents (85%) say they feel comfortable with the investment choices they have made.

Of the 39% of individuals who said they are not familiar with all of the investment options in their retirement plan, 42% said they chose how to invest their retirement savings themselves. Thirty-one percent of respondents overall said they have made no choice at all, placing their savings in their employer’s default investment option.

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The survey also reveals that nearly 40% of individuals feel they have either too many or too few investment options in their retirement plan.

“People may be missing out on options that could help ensure they will achieve their goals, or they could be choosing the wrong options for their particular situation,” says Teresa Hassara, executive vice president of institutional business at TIAA-CREF. “Advice and education can make an enormous difference in helping people ensure that their strategy and mix of investments will fulfill their expectations for retirement.”

Unfamiliar with Target-Date Funds

According to the TIAA-CREF 2015 Investment Options Survey, only 35% of individuals are familiar with target-date funds, and just 10% say they are invested in one.

Those who are invested in the funds were asked to evaluate what they find most appealing about them. Of that group, 36% said it is the professional management that automatically and appropriately rebalances investments over time, while another 33% cited the ease and convenience of a single investment choice as being most appealing. The survey found that 83% of people who have a target-date fund also have savings in other investments.

Thirty-seven percent of respondents invested in target-date funds want their fund to grow slightly more conservative but continue investing for growth as they approach retirement, while another 24% want their fund to continue investing for growth without growing more conservative. Survey results suggest that many people do not realize there are differences between target-date funds: Only 55% of individuals invested in target-date funds recognized that various funds differ in their investment mix.

“While target-date funds are designed with a similar purpose, not all target-date funds are the same, and choosing the right one for your situation is important,” says Hassara.

The survey was conducted by KRC Research by phone among a national random sample of 1,000 adults, ages 18 and older, from January 7 through 13, 2015, using a combination of landline and cell phone interviews. Nearly half of respondents (46%) reported they are concerned about running out of money in retirement.

DOL Series Takes on Fiduciary Challenges for Small Sponsors

A webcast series from the DOL aims to help increase awareness and understanding about basic fiduciary responsibilities for plan sponsors of retirement or health benefit plans.

“Getting It Right – Know Your Fiduciary Responsibilities,” a training series from the Department of Labor (DOL), is designed to address some of the challenges of operating an employee benefit plan. 

Small and medium-sized employers may be especially hampered because of limited time and resources, or limited access to professional help with benefit programs, DOL says. The department’s three-session series will help increase awareness and understanding about basic fiduciary responsibilities when operating a retirement or health benefit plan. Employers and service providers can learn how the fiduciary responsibility provisions of the Employee Retirement Income Security Act (ERISA) apply to both types of plans, along with information on how to avoid common problems when managing a plan.

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The series will guide plan sponsors and providers through their fiduciary responsibilities, covering topics that include selecting and monitoring service providers, making contributions on time, providing appropriate disclosures to plan participants and filing annual reports to the government on time, and avoiding prohibited transactions.

Speakers from the DOL will discuss the following:

Health plans – Basic fiduciary responsibilities when operating an employer-sponsored group health plan, ERISA’s reporting and disclosure provisions, and qualified medical child support orders (QMCSOs).  This webcast will not cover the Affordable Care Act. The webcast will take place March 12, from 2 p.m.to 4 p.m. (Eastern).

Retirement plans – Basic fiduciary responsibilities when operating an employer-sponsored retirement plan and ERISA’s prohibited transactions provisions and exemptions. The webcast will take place March 18, from 2 p.m.to 3:30 p.m. (Eastern).

Plan compliance – ERISA’s reporting and disclosure provisions for employer-sponsored retirement plans and the DOL’s voluntary correction programs for retirement plans. The webcast will take place March 19, from 2 p.m.to 3:30 p.m. (Eastern).

Attendees can register for all sessions or for individual sessions. The series is sponsored by the Employee Benefits Security Administration (EBSA) of the DOL.

Information on how to register for the webcast series is here.

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