We've charted the evolution of defined contribution (DC) plans after conducting over a decade of plan sponsor and participant research. In this latest installment, we're seeing some helpful trends becoming the accepted standard. But there are also new frontiers that can further improve retirement readiness, as well as some problematic trends that need attention and change.
of plan sponsors do NOT consider themselves a fiduciary
Plan Sponsors Who Consider Themselves, Personally, Plan Fiduciaries
Those Who Do Not See Themselves As Fiduciaries—Perception Of Responsibility By Role In The Plan
What Have Been The Impacts Of The Program?
Respondents who state they offer financial wellness programs
US Population 65 and Over
46 Million in 2016
98 Million in 2060
When plan sponsors were asked about their organization's philosophy regarding terminated or retired participants' balances in the plan, key responses included participants should:
Roll over their assets into an IRA or another qualified plan
We don't have a philosophy one way or another
Keep their money in the plan
Take a lump-sum distribution (cash-out)
It's Not All About Fees...
of plan sponsors ranked investment performance as the most important attribute of target-date funds
Runners up include...
Reenrollments are on the rise. It is a powerful way to steer employees into effective investment options and provide fiduciary safe harbor to plan sponsors who reenroll into a target-date fund QDIA.
of plan sponsors say they've conducted a reenrollment during the past three years
Nine in Ten participants are happy with reenrollment
Only One in Five
participants opt out
Three in Ten who pick their own investments choose the default
of plan sponsors value the access to individuals who are highly knowledgable/expert on fiduciary and plan design issues
Plans Using Advisors Show:
participation in the last three years
average savings among participants
participants improving their retirement readiness
In late 2016, AB' defined contribution team conducted a web-based survey of over 1,000 plan sponsors. The survey's respondents had roughly equal representation from all plan sizes across the full universe of DC plans. So, the survey doesn't necessarily reflect the status quo for overall DC assets, which are more heavily weighted to the largest plans (referred to here as "institutional" plans).
Here is a breakdown of respondents by plan size:
The goal was to understand how plan sponsors feel about the current state of their companies' plans, their participants and the DC industry. This includes the key findings from our survey. It comprehensively updates the research we last conducted in 2014.
"Target date" in a fund's name refers to the approximate year when a plan participant expects to retire and begin withdrawing from his or her account. Target-date funds gradually adjust their asset allocation, lowering risk as a participant nears retirement. Investments in target-date funds are not guaranteed against loss of principal at any time and account values can be more or less than the original amount invested—including at the time of the fund's target date. Also, investing in target-date funds does not guarantee sufficient income in retirement.
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