Prudential’s New App Measures DC Plan Health

Plan Power by Prudential evaluates a range of plan design features, so financial advisers can help plan sponsors see how making certain changes could result in positive participant behavior.

Prudential Investments has launched a new iPad app designed for plan adviser use to help defined contribution (DC) plan sponsors gauge the effectiveness of their plans.

Plan Power analyzes several factors such as auto enrollment and escalation rates, investment selections, fees paid by participants, and projected retirement balances to provide plans with a score. This number measures how well the plan is balancing positive retirement outcomes with spending. Through the interactive interface, plan sponsors can visualize how modifying certain plan design features may enhance participants’ retirement readiness as part of their overall financial wellness.  

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“Participants can’t be expected to achieve individual financial wellness if they are investing in a poorly designed or inefficient retirement plan,” says Stuart Parker, president of Prudential Investments. “By focusing on plan wellness, advisers and plan sponsors can lay the groundwork for a sound plan that helps participants achieve successful retirement outcomes.”

Prudential says Plan Power also helps plan advisers and sponsors “run real-time scenarios with actionable ideas to evaluate the impact of potential plan changes.” The firm says this app is the first of its kind in the industry, and it focuses on a holistic approach to individuals’ financial wellness in a time when regulatory changes in the industry is putting this variable at the forefront.

Plan Power is supported by Prudential Retirement’s proprietary actuarial, plan design and data analytics expertise. Financial advisers and plan sponsors can download the app through the Apple App Store by searching for ‘Prudential Plan Power’ on their iPads. To activate the app, users must contact a Prudential Retirement Investment Services representative at 877-275-9786.

Prudential Investments is the retail distribution arm of PGIM, the investment management business of Prudential Financial.

Trends, Regulations Could Affect Not-for-Profit Health Care Investments

Mercer suggests not-for-profit health care organizations keep an eye of 403(b) lawsuits, ACA regulations and DB funding, among other things, when making investment decisions in 2017.

Mercer suggests areas of focus for not-for-profit health care organizations as costs may grow faster than revenues and possible post-election changes to the Affordable Care Act may have significant impact.

First, Mercer suggests not-for-profit health care organizations take note of recent 403 (b) lawsuits. Higher education institutions have faced a spate of lawsuits regarding their 403(b) plans. Not-for-profit health care organizations should take heed of this and ensure that their benefits and investment committees have reviewed vendor relationships and fees and optimized investment options so that their retirement plans are following best practices, especially not-for-profit health care organizations who have recently completed a merger and/or may have multiple defined contribution (DC) plans.

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Mercer also suggests any not-for-profit health care organizations that are either undergoing or considering actions such as mergers and acquisitions (M&As), operating agreements or joint ventures should be aware that some of these actions may materially alter an organization’s balance sheet. Finance and investment committees should consider how best to integrate investment strategy and whether these factors may necessitate a change in their investment risk profile.

Interest rates have risen since the U.S. presidential election and may rise further, so not-for-profit health care organizations should assess their overall interest rate sensitivity, incorporating their investment assets, retirement plans and debt portfolio. Specifically, some organizations’ debt portfolios may benefit from higher interest rates as much of their debt portfolio is fixed rate. Those with a defined benefit (DB) retirement plan may see a reduced liability with higher long-term rates.

Though rates have recently risen, interest rates have been low for several years; in turn affecting not-for-profit health care organizations’ DB plans’ funded status. Funded status fluctuates based on interest rate activity, investment returns and plan sponsor cash contributions. Achieving a fully funded DB plan typically takes years, so it is important to develop a roadmap to de-risk a plan as funded status improves. This means not-for-profit health care organizations should review their current DB investment strategy and make appropriate changes as required, Mercer says.

NEXT: Other suggestions

Other suggestions from Mercer include:

  • Assess impact of the election: The new administration may have significant implications for the Affordable Care Act. Organizations should reevaluate their risk tolerance and investment strategies, as operating results may be significantly affected by potential changes.
  • Plan holistically: Not-for-profit health care organizations should take an enterprise-wide view of their investment risk posture and integrate their investment strategy with their financial plans. Organizations’ risk level should account for illiquid investment strategies that may be excluded from the days-cash-on-hand calculation.
  • Acknowledge ‘country bias’: US markets have outpaced most others since the bottom of the great recession in 2009. After such an extended period of dominance, it is perhaps natural for U.S. investors to raise the debate of whether they should keep their globally diversified portfolio. Not-for-profit health care organizations should evaluate the pros and cons of their current asset allocation and determine if they should make their allocations based on global market weights or peer behavior.
  • Evaluate inflation sensitive investments: Changes in global pricing dynamics need to be evaluated by investment committees. Nonprofit committees must balance the negative impact to inflation-sensitive investments in today’s low-inflation or deflationary trend with the potential for inflation surprises.
  • Review governance structures: Not-for-profit health care organizations are being pressured to reduce costs while increasing the quality of care. In this environment, health care organizations may want to look at outsourcing some elements of their investment function to potentially reduce investment expenses and free up staff and committee time to focus on strategy.
  • Adopt socially responsible investment principles: Socially responsible investment offers not-for-profit health care organizations the opportunity to align their investment values with their core mission to promote health by screening out investments with significant revenue from tobacco, alcohol and firearms products, among others. Socially responsible investment, which can be tailored to fit well with an institution’s core values, should be considered by not-for-profit health care organizations in 2017.

The not-for-profit health care 2017 priorities paper can be found here.

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