The Principal Financial Group is offering services with eSignature capabilities to better streamline the transfer from one retirement plan provider to another.
The Principal’s eSignature capabilities give plan sponsors
the ability to sign transition paperwork electronically, allowing them to
securely sign one or multiple documents, saving time.
Other services related to plan provider transition include:
Dedicated support in overseeing the transition
process; and
Retirement plan documents stored in one
convenient location, accessible anytime, helping sponsors stay well organized
as they manage their fiduciary duties.
Plan sponsors also have the option of a streamlined strategy
for transferring plan assets, automatically defaulting participants into a
qualified default investment alternative (QDIA) selected by the plan sponsor.
Participants have the choice to opt out during the transition or after.
“The
Principal has transitioned plans from nearly 450 different service providers.
Smooth transitions help maintain the value of the retirement plan,” says Mike
Daugherty, vice president of retirement and investor services at The Principal.
“Our redefined process also saves the financial professional and plan sponsor
valuable time and helps the plan sponsor manage their fiduciary
responsibilities.”
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The trends of automatic enrollment, automatic contribution
escalation, and automatic investing—in the form of target-date funds and
managed accounts—have already taken hold. But now, DC plan sponsors are
starting to take some lessons from the DB investment approach.
“Institutions have modernized their approach to creating
long-term financial security, and individuals are trying to catch up,” explains
P. Brett Hammond, managing director and global head of index applied research
at MSCI, who co-authored a research paper with Juliana Bambaci, senior analyst
for index applied research at MSCI, titled “Bringing the Best of DB to DC Fund
Options.” Hammond tells PLANSPONSOR, “There is a need for modernization in
investment choices/fund selection and asset allocation to catch up with
successes institutions have achieved.”
Hammond contends that individuals often suffer from fund
lineups that have too many similar funds or do not include the full investable
universe.
The paper says, “defined contribution (DC) plans and wealth
management advisers are turning to lessons from institutional investing,
including its emphasis on low expenses, long-term returns, appropriate funding
levels, and liability driven investment (e.g., income replacement), in an
effort to significantly improve outcomes for individuals.” According to the
paper, plan sponsors and advisers are doing this by adopting a global
investment framework, in which they select a global index to guide asset
allocation and construction of the core investment menu for DC plans as well as
target-date funds used.
Hammond
explains that traditionally, DC plans may have started out with a domestic
stock fund, a domestic bond fund and perhaps a stable value fund, then tacked
on investments thought to be missing, such as international funds and small cap
versus large-cap equity. He and his coauthor suggest moving in the opposite
direction. “If you keep bolting things on, you don’t know if you are covering
the whole opportunity set,” he says. “Start with the opportunity set and create
the lineup. That way you can make sure there are no gaps and no overlaps.”
As an example, Hammond suggests plan sponsors can find an
index that represents the global investment set; for equities, that would
include large cap, small and mid cap, domestic and developing and emerging
markets. Plan sponsors would select funds for their core lineups that would add
up to the whole index. There may be three or four funds that would do this.
The research paper suggests plan sponsors and advisers can
also use indexes to monitor and evaluate funds. “Like other institutional
investors, plan sponsors and advisers can set investment goals through the use
of clear, explicit benchmarks and then compare each individual fund choice
against its benchmark,” it says. “Further, since performance and fees vary by
mandate—as represented by a benchmark or index—sponsors and investors can
better compare funds that compete to offer a specific mandate.”
Plan sponsors already regularly review their fund lineups,
so they should now take a look at their lineups and ask providers and advisers
for help in deciding if the lineup conforms with a global perspective or if it
still kind of bolts things on, Hammond recommends. “Talk about the next
opportunity. Should you do an RFP [request for proposals]? Once you start doing
that, create a policy benchmark that will represent a global investment
perspective. That makes it much easier to have a discussion about how to
identify mandates or funds.”
According to Hammond, the trend of implementing a global
investment approach isn’t as far along as auto enrollment and auto escalation
of contribution rates, but it is starting with plan sponsors that also have DB
plans. He contends the trend will move to standalone DC plans.
“I think this is an exciting time for DC plans. There has
been a lot of criticism of DCs over the last 10 to 15 years about not helping
long term savers in the same way DB plans have been able to do over time. We’re
seeing a transformation going on—a change with many approaches being used,
including auto features and new investment lineups. We will see a trend toward
improved plans that help individuals meet long-term savings goals, and a global
investment perspective is very much a part of that.” Hammond concludes.