A New Dawn

It brought together a wide swath of stakeholders from all over our industry—third-party administrators (TPAs), advisers, consultants, broker/dealers, investment managers, industry thought leaders and others. For two days, we discussed holistically how we could better encourage Americans to save and what types of policies and messages could better engage people with that crucial goal.

Less than a week later, I hosted our annual PLANADVISER Top 100 seminar and the PLANSPONSOR/PLANADVISER Awards for Excellence in New York, where we recognized recordkeepers, investment managers, plan sponsors, consultants, advisers and others who have made great contributions to our industry (you can find out more about the awards dinner on page 38).

What I was struck by at both events was the camaraderie on all sides of the retirement plan industry “aisle.” Competitors by day, allies by night, those across all segments of the industry spoke about the challenges to helping people achieve a secure retirement.

As an industry, we have spent a lot of time and money trying to make Americans investors—instead of making them savers. Now the industry appears to be coming full circle, with the realization that what employees and participants need to know is how important it is to save in their retirement plans—not what the difference is between a large-cap growth and small-cap value fund. Instead of selling features, products and benefits, now providers are selling outcomes and solutions for participants—solutions that do not require, or even ask, them to be Jim Cramer.

As our cover story this issue (see page 28) discusses, the “supercharged 401(k) ”takes that conversation and puts it into plan design. This is a move away from the defined contribution (DC) plan as a “participant-directed” plan, yet toward a plan that is defined contribution by nature but finally answers the question asked by every participant at the end of an enrollment meeting or education session—“What should I do?”

By embracing the Pension Protection Act (PPA) provisions and creating an auto-everything plan—a plan that provides participants the opportunity to back out but also reminds them (sometimes by repeatedly re-enrolling them) that they should save for retirement—the “supercharged 401(k)” is often called the DB-ification of the DC plan.

Of course, as research shows—and as I was reminded while at the retirement savings summit—that phrase is oxymoronic. While many people often look back and say things were better when more people were covered by a pension or defined benefit (DB) plan, that memory is not based in reality. The truth, when you look at the numbers, is that because of the tenure and vesting rules in place at companies that sponsor pensions, most employees never worked at a single company long enough to actually receive a pension that would have replaced a majority of their final income. Therefore, in many ways, the DB-ification of the 401(k) plan—when done properly and early enough—might help people truly accumulate enough savings to retire.

Shlomo Benartzi, the UCLA professor and behavioral economist, has written about something he calls the 90-10-90 rule: that at least 90% of employees should be enrolled in their employer’s plan; that savings rates should be 10% at minimum; and that 90% of investors should be invested in a proper asset-allocation fund or model. How many of your plans meet that benchmark, and with how many of your plan sponsors have you discussed something of the sort? In other words—how many of the “supercharged 401(k)s are your clients?

The quest to create such plans is exemplified by the 2013 PLANSPONSOR Retirement Plan Adviser of the Year finalists—in the individual, team and multioffice categories. You can “meet” them and learn more about their practices, beginning on page 42. 

In this issue, we also have our annual Adviser Value Survey (page 32), in which we compare demographics of plans that work with advisers to those that do not, an article about responding to requests for proposals (RFPs) (page 68) and a discussion about retirement income calculators (page 64)—plus, of course, our columnists, Steff Chalk (page 71) and Marcia Wagner (page 72). 

For those of you whose clients’ 401(k) plans are already well on their way to being a “supercharged 401(k),” I applaud your efforts; to those of you hitting resistance with your clients when you present such ideas, I encourage you to keep pushing plan sponsors in that direction. I do believe—in the vast majority of cases—helping participants help themselves is the right thing to do.