Data & Research June 17, 2009

Vanguard Sees Continued Explosion in Target-Date Fund Usage

The Vanguard Center for Retirement Research reported that the use of target-date funds in defined contribution plans administered by Vanguard continues to grow rapidly.
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A Vanguard news release said at the end of 2008, seven in 10 such plans offered a target-date fund, and more than one-third of participants opted for them.

The report notes that three factors were fueling the adoption of target-date funds by plan sponsors and participants:

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  • the funds’ simplified approach to investment decisionmaking;
  • the growing use of automatic enrollment within plans;
  • target-date funds’ designation as a qualified default investment option under the Pension Protection Act of 2006.


Data & Research June 17, 2009

Most Employers Don’t Plan Contribution Reduction

A survey by Mercer found that 73% of organizations globally do not plan to reduce the level of employer contributions to defined contribution plans in the remainder of 2009, while 14% of have already done so in the past six months
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To date, a third have reviewed their overall investment menus (32%) and reviewed both investment and administrative fees (33%), while 43% are likely to take these actions by year-end, according to a news release from Mercer about its latest Leading Through Unprecedented Times global survey.

Regarding defined benefit plans, 37% of organizations plan to get a better understanding of, and take actions to mitigate the risk inherent in these plans, according to the news release. Within the six months prior to the survey, 34% have already done so.

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Looking ahead, organizations are more likely to change their DB plan investment strategy to reduce risk (38%) rather than change the funding policy (25%). Fourteen percent and 12%, respectively, have already taken those steps. Only 16% of organizations are likely to cut back or stop accruals in the remainder of the year, while 10% have already done so.

 

 

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