Products September 21, 2022

Wilmington Trust Introduces Digital CIT Onboarding Tool

Plan adviser users of the tool can automatically pull key data for the plan they are advising into the system from the data contained in the IRS Form 5500 database.

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Wilmington Trust has introduced the BoardingPass application to digitize and streamline the onboarding of collective investment trusts for employer-sponsored retirement plans.

The company hopes the application will increase the availability and use of CITs for employer-sponsored retirement plans by removing paperwork and implementing a digital onboarding process.

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The paper-based onboarding process is onerous for employer-sponsored plans wanting to use CITs, explains Rob Barnett, head of Wilmington Trust retirement distribution and product leader for CIT business, because a plan’s eligibility to invest in CITs must be confirmed through a retirement plan participation agreement.

“To invest in a CIT, a plan sponsor or its delegated fiduciary has to complete a participation agreement that really represents and warrants that they’re eligible to invest in this tax-qualified vehicle,” he says.

“That has left a lot of people to believe that the onboarding process for CITs must stay paper-based, and while we all work continually to try to make the paper-based process better, it really doesn’t allow for the democratization of the use of CITs. BoardingPass brings to pass the democratization of the retirement plan onboarding process, as well as adding CITs as plan options.”

The app serves as a central hub for all plan information. Wilmington Trust says rather than requiring an employer-sponsored plan to manage reams of paperwork, which can lead to errors and takes an average of one to five business days to submit, users of the web-based platform can shorten the timeline by up to 80%.

Plan adviser users of the tool can automatically pull key data for the plan they are advising into the system from the data contained in the IRS Form 5500 database; a Form 5500 is the annual report filed by employer-sponsored plans with the Department of Labor. The tool prepopulates the correct form fields with information on a plan’s financial condition, investments and operation.

Plan sponsors may be able to gain the benefit of real-time information-sharing and a digital connection to their critical service provider partners, according to a press release.

Data & Research September 21, 2022

U.S. Drops to 18th on Natixis Retirement Index, Due to Economic Issues, Aging Population

This year’s report warns that “key risk concerns for retirement security are coming to a head in today’s rapidly changing economic environment.”

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Due to lower scores on key measures, such as employment, income equality, government debt and tax pressure, as well as a surge in the nation’s older population, the U.S. fell one spot this year to No. 18 in Natixis Investment Managers’ 2022 Global Retirement Index.

Norway reclaimed the number one spot, out of the 44 developed countries, in this year’s ranking after four years in third place, and earned a score of 81%, followed by Switzerland, with a score of 80%. Iceland, which was the top ranked country in 2021, slipped two spots into third with a score of 79%.

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The index incorporates 18 performance indicators, divided into four thematic sub-indices, which Natixis calculates using data compiled from a range of international organizations and academic sources. It takes into account the particular characteristics of the older demographic retiree group in order to assess and compare the level of retirement security in different countries around the world. The researchers calculated a mean score in each category and combined the category scores for a final overall ranking of the countries.

Ireland and Australia rounded out the top five with scores of 76% and 75%, respectively. In the remainder of the top 10 is New Zealand (75%), Luxembourg (75%), the Netherlands (75%), Denmark (74%) and the Czech Republic (74%).

This year’s report warns that “key risk concerns for retirement security are coming to a head in today’s rapidly changing economic environment.” It also says rising inflation is “taking a dramatic bite” out of retirees’ purchasing power.

“Inflation has been the long-sleeping giant of worries for retirees and is now at the apex of retirement security threats,” Dave Goodsell, executive director of the Natixis IM Center for Investor Insight, said in a statement. “The rate hikes the Federal Reserve and other central banks have implemented to quell inflation further compound the problem, creating short-term pain for retiree portfolios.”

The report also says an aging population is a source of concern, and cites OECD projections that the share of the world’s population that is age 65 and older will rise to 26.7% by 2050, up from 17.3% in 2019. The problem is best demonstrated by the so-called “old-age dependency ratio,” it adds, which is the number of retired people out of every 100 people within a population.

“For most of the developed world, that number has been climbing steadily higher for the past century,” notes the report, which says the old-age dependency ratio in the U.S. has doubled to 28.4% in 2020 from 14.2% in 1950. It says that figure will climb to 40.4% by 2050. According to the report, the challenges of increased life expectancy are particularly problematic in countries with a pay-as-you-go retirement system, such as the U.S.’s Social Security system.

“A larger population that will live longer breaks the formula behind most pay-as-you-go retirement systems,” the report says. “What makes them work is the balance between the number of working age people and the number of retirees – and others – drawing benefits.”

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