Getting to the Right Place
There is no doubt that in the last few years in particular,
retirement plan advisers have succeeded in making great strides in improving
plans. More sponsors are automatically enrolling employees; some are initially
deferring participants’ savings at 6% rather than 3%; a handful are using
automatic escalation or stretch matches; and more are actually looking at the
percentage of their work force that is on track to replace 75% of their income
in retirement. But the fact remains that the majority of retirement plans are
nowhere near getting people to the right place.
“Power Stance” addresses some of the plan design tools that retirement plan advisers should be promoting to motivate both sponsors and participants to take their retirement plans seriously, and to get more people better prepared for a comfortable retirement. If you are not already reaching out to the chief financial officer (CFO) at your clients, you should be, to champion why it is a smart business decision to get people on the right retirement track, vs. to have an aging, costly work force lacking the resources to retire.
The research in this issue covers the defined contribution investment only (DCIO) market. DCIO managers command 48% of the assets in defined contribution (DC) plans, and this is expected to grow to a 52% market share by 2020. As these investment managers hold much influence over DC plans, we spoke with some of the leading DCIO providers and researchers about the challenges and opportunities they see in the market. Several executives believe the penchant for passive investments will wane in light of expected lower returns and higher volatility in the market. And a number of executives expect target-date funds (TDFs) will begin to offer retirement income for investors in retirement. Read what they said in “Up in the Air.”
“Shielding Yourself” explores the pros and cons of being a 3(38) or a 3(21) fiduciary. As more advisers decide to offer only 3(21) fiduciary services, this has allowed those providing 3(38) services to stand out. Some plan sponsors like the added protection from a 3(38) fiduciary, but advisers need to point out to them that they still have fiduciary responsibilities and should monitor those 3(38) services closely.
It is inevitable that retirement plans make mistakes, but, in “Avoidance Strategies,” we discuss what the most common ones are and how you can avoid them. Late deferral deposits and incorrect compensation definitions are two of the most frequent errors.
While defined benefit (DB) plans have long invested in alternatives, DC plans have begun to embrace them as well. “Seeking Alternatives” explores the types of investments in this strategy that target-date funds are adopting and how they could benefit participants’ portfolios.
“Expanding Savings Options” makes the case for offering a nonqualified deferred compensation (NQDC) plan for highly compensated employees, and how that could provide an additional revenue stream for your practice. We hope you find these stories eye-opening and beneficial to your work.