Data & Research July 20, 2015

Sponsors Actively Working to Derisk DBs

Seventy percent of DB plan sponsors are contributing more to their plans than the minimum required amount.
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Plan sponsors feel tremendous pressure from their defined benefit (DB) plans and are looking to reduce their risks, according to the Mercer / CFO Research 2015 Risk Survey, “Taking the Next Step in Pension Risk Management: Planning to Move Ahead.”

In 2013, when Mercer conducted its previous survey, funded status improved to 88% due to rising interest rates and strong equity returns. However, in 2014, it fell to 79%, prompting 70% of DB plan sponsors in 2015 to contribute more than the required minimum amount to their DB plans. In addition, 59% of sponsors have offered some type of one-time lump-sum payment to DB plan participants, and another 49% expect to offer such a payment within the next two years.

More than one-third (36%) of DB plan sponsors expect to purchase an annuity either this year or in 2016. Twenty-two percent said they have closed their defined benefit plans to new hires, 26% have partially frozen their DB plans, and 16% have completely frozen their DB plans. Dynamic derisking is another strategy sponsors are taking, with 42% using this method and 39% considering it.

Given all of these measures, 90% of sponsors are very satisfied with the risk management actions they have taken.

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The reasons sponsors said they are so proactive about lessening their risks include the fact that the Society of Actuaries increased its mortality assumptions; 37% of sponsors said this was a reason why they will be improving their pension funding policies in the next two years. Just over one-quarter (27%) also noted that the Pension Benefit Guaranty Corp. has increased its premiums.

“2014 was a game changer for the pension industry, with factors like new mortality tables and market volatility causing funded status to decline,” says Matt McDaniel, a partner with Mercer Retirement. “CFOs need to be attuned to an evolving pension market and use the best tools and resources available to develop DB strategies that make the most economic and strategic sense for their organizations.”

The findings are based on a survey of 213 senior executives that Mercer and CFO Research conducted in April and May 2015.

Products July 17, 2015

Envestnet Unveils Fund Strategist Network

The ERS Fund Strategist Network from Envestnet gives retirement plan advisers scalable access to intellectual capital from more than 60 institutional managers.
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Envestnet Retirement Solutions has introduced the ERS Fund Strategist Network, a roster of institutional-grade and boutique strategic and dynamic fund strategists. The platform gives retirement plan advisers access to quality unitized fund strategist portfolios, which are monitored by ERS.

After the strategist assessment is completed, fund strategists in the network submit their models of mutual funds and/or exchange-traded funds (ETFs) to ERS, which facilitates trading and unitization for these portfolios through its model management system. In addition, ERS serves as the 3(38) investment manager on behalf of 401(k) plan sponsors for the fund strategist portfolios available through the platform.

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Envestnet has been providing financial advisers with flexible, efficient and scalable access to intellectual capital from more than 60 institutional managers through its Envestnet Fund Strategist Network, and now offers a similar service for retirement plan advisers, says Babu Sivadasan, group president of ERS.

“Given the adoption of the fiduciary standard and prudent investment practices in the retirement industry, we believe the network can help broker/dealers, banks and trusts, and retirement advisers to truly act in the best interests of plan sponsors and participants,” Sivadasan said in a statement.

The ERS model management framework forms the basis of ModelTool(k)it, a modeling and unitization solution for mutual fund- and ETF-based portfolios available through Matrix Financial Solutions, a Broadridge Financial Solutions company. ModelTool(k)it was brought to market in August 2014 through a strategic alliance between ERS and Matrix Financial Solutions, which offers access to the ERS Fund Strategist Network. 

On ERS Fund Strategist Network’s current lineup are: 3D Asset Management, Beaumont Capital Management, CLS Investments, Efficient Market Advisors, Fund Evaluation Group, Horizon Investments, Madison Asset Management, Russell Investments, Sage Advisory and Standard & Poor’s Investment Advisory Services LLC. Additional fund strategists may be approved for inclusion. 

More information about ERS and the ERS Fund Strategist Network is available at the website of Envestnet.

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