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Americans Need to Change Their Retirement Trajectory

There is a problem with the difference between Americans' current retirement trajectory and where they want to be when they actually get there. A new report from digital financial wellness platform Savology on the current state of personal finance in the U.S. shows Americans need to make changes to achieve the retirement they expect.

Source: 401kspecialistmag.com, January 2021

Poll Finds 60% Raided Retirement Accounts During Pandemic

While we've often seen studies showing that people have largely refrained from raiding their 401ks to help cover expenses during the COVID-19 pandemic, every now and then we hear differently. According to a new poll released Jan. 6, nearly 60% of Americans withdrew or borrowed money from an IRA or 401k during the pandemic, and nearly two-thirds (63%) used those retirement savings to cover basic living expenses.

Source: 401kspecialistmag.com, January 2021

Mutual Fund Revenue Sharing in 401k Plans

Recordkeepers in DC plans are often paid indirectly in the form of revenue sharing from third-party funds on the menu. We show that these arrangements affect the investment menu of 401k plans. Revenue-sharing funds are more likely to be added to the menu and are less likely to be deleted. Overall, revenue-sharing plans are more expensive as higher expense ratios are not offset by lower direct fees or by superior performance. Rebates increase with the market power of the recordkeeper suggesting that third-party funds may revenue share to gain access to retirement assets.

Source: Ssrn.com, December 2020

Another Record Year for Retirement Savings

PSCA's 63rd Annual Survey found record contribution and participation rates for the third year in a row. More employees had account balances in and contributed to, their plans than ever before, and employers contributed an average of 5.3% of gross annual pay to participants, the highest recorded to date. Plan participants contributed an average of 7.6% of pay in 2019, combined with the 5.3% of companies are pitching in gives an average savings rate of 12.9 percent in 2019.

Source: Psca.org, December 2020

Two Million US Workers Dipping Into 401ks for Cash Amid Pandemic

At least 2 million U.S. workers have tapped into their 401ks and retirement plans for funds amid the nearly yearlong coronavirus pandemic, according to the largest financial planning administrators. Fidelity, Empower Retirement, Vanguard, Alight Solutions, and Principal, reported more than 2.1 million Americans have pulled funds from retirement planning accounts since the economy took a hit due to the pandemic in March.

Source: Thehill.com, December 2020

Most 401k Plans Weathered 2020 Without Reducing Employer Contributions

In contrast to the response during the 2008-09 financial crisis, more than 90 percent of employers will make their retirement plan contributions this year, though smaller organizations are more likely to have suspended or reduced employer-matching contributions in the wake of the COVID-19 pandemic. Although the overall share of organizations that reduced 401k plan contributions were relatively small -- around 8 percent -- that still represented nearly 46,000 plans throughout the U.S.

Source: Shrm.org, December 2020

Nearly 46,000 Businesses Slashed 401k Contributions During Pandemic

Thousands of companies have cut funding they typically pay to 401k investors, due to the coronavirus pandemic, according to a new survey. About 8% of employers slashed their 401k contributions in recent months, according to the Plan Sponsor Council of America, a group that represents companies with workplace retirement plans. Another 1% are considering doing so.

Source: Cnbc.com, December 2020

Another Record Year for Retirement Savings

The Plan Sponsor Council of America's Annual Survey shows that 2019 was a banner year for retirement plans, and doubtless a valuable lifeline for many during the COVID-19 pandemic. For the third year in a row, the survey found record contribution and participation rates. 70% of plans use an investment advisor for the plan; one-third of plans offer investment advice to participants; and a quarter of participants with that access take advantage.

Source: Napa-net.org, December 2020

Plan Design Decisions Can Reduce Overconcentration in Company Stock

A recent analysis from Vanguard explores the gradual abandonment of company stock in DC plans. The Vanguard analysis found demographic characteristics such as age, income, education, job tenure, and nonretirement wealth, while statistically significant, are not strongly related to the percentage of company stock in a participant’s account balance. The researchers found plan sponsor design decisions have the strongest relationship to the proportion of participant holdings in employer stock.

Source: Plansponsor.com, December 2020

Employers Set Sights on Innovative 401k Plan Design Changes

To boost their plans' value and enhance their employees' overall financial wellbeing, U.S. employers are eyeing innovative features for their defined contribution plans, according to a new survey. A Willis Towers Watson plan sponsor survey found that two in three employers either have or are very interested in adding at least one innovative design feature to their plan.

Source: Napa-net.org, December 2020

Income Annuities Are "Best Solution for DC Plans": Cerulli

Annuitization products where an investor converts a lump sum to a guaranteed income stream in retirement are a "better solution for defined contribution plans," according to a recent issue of The Cerulli Edge. But 64% of respondents to Cerulli's 2020 Target-Date Manager Survey still cite lack of plan sponsor demand for guaranteed retirement solutions as an obstacle to adoption.

Source: Retirementincomejournal.com, December 2020

CITs Are Sweeping Through the Retail 401k Market

At the 2020 InvestmentNews RPA Convergence CIO Roundtable and Think Tank, Jamie Battmer, chief investment officer for Resources Investment Advisors, said collective investment trusts were gaining so much momentum that "40 Act funds [in 401k plans] are going the way of checkbooks." There are many compelling reasons for this rather swift transformation in the retail 401k market. There are also still many questions about collective investment trusts, or CITs, but none of them seem to be show killers.

Source: Investmentnews.com (registration may be required), December 2020

401ks Warming to Rainy Day Savings, Student Loan Features

The majority of defined-contribution plan sponsors are interested in adding features that would help employees build emergency savings and pay down student loans, according to new data just published.

Source: Investmentnews.com (registration may be required), December 2020

Half of Americans With Incomes Over $100,000 Think They'll Never Be Able to Retire

Nearly every household with an income of $100,000 or more saves for retirement, but only half of them (49%) believe they will ever be able to retire. These findings were part of the "2020 Financial Insights" study of 2,000 U.S. adults 40-65 years of age with an annual household income of at least $100,000.

Source: Edelmanfinancialengines.com, December 2020

Congressional Research Service Examines Access to, and Participation in, Employer-Sponsored Plans

While a strong majority of employers provide access to a plan, that doesn't necessarily spell participation rates that match, says the Congressional Research Service. In a new report, the CRS provides data on the percentage of U.S. workers who can and do participate in employer-sponsored pension plans, which the report defines as both defined benefit and defined contribution plans.

Source: Asppa.org, December 2020

Exposing Excessive Fee Litigation

This 24-page white paper explores the problems with the recent surge in excessive fee litigation. Plaintiff law firms have flooded the federal courts with cookie-cutter ERISA class action litigation against defined contribution plans. The copy-cat lawsuits -- now nearly 200 in number with over 90 filed in 2020 alone -- attack retirement plan investment options that are commonplace and longstanding. The paper suggests four systemic reforms needed to restore a fair and uniform fiduciary standard of care.

Source: Euclidspecialty.com, December 2020

New 403b Survey Finds Signs of Strength, Concern

The vast majority (83.6%) of non-profit organizations with 403b plans are not changing their contribution levels despite the financial pressures of the COVID-19 pandemic, according to a new Plan Sponsor Council of America snapshot survey. While the vast majority of organizations are not planning on changing their employer contribution levels this year, nearly a third of higher education institutions say they either have -- or will by year-end -- reduced or suspend contributions to their 403b plans.

Source: Napa-net.org, December 2020

Student Debt Cuts Into Retirement Savings for All Age Groups

Even though interest rates are lower, overall student debt has soared during the pandemic, regardless of a borrower's age or occupation. Some 44 million Americans now owe an estimated $1.67 trillion in student debt. The spiraling amounts of debt are having a serious impact on every generation's retirement outlook. A substantial majority (80%) report that student debt is cutting into their ability to save adequately for retirement.

Source: Investopedia.com, November 2020

Retirement Savers Undeterred by COVID-19 Economic Downturn

Americans overwhelmingly continued saving for retirement through DC plans during the first three quarters of 2020, undeterred by the economic downturn brought about by the COVID-19 pandemic, according to ICI. The study tracks contributions, withdrawals, and other activity in 401k and other DC retirement plans, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans at the end of September 2020. This study also tracks coronavirus-related distributions among plan participants to provide insight into financial activity related to the pandemic.

Source: Ici.org, November 2020

DC Plan Participants' Activities, First Three Quarters of 2020

This 20-page report covered DC plan participants' activities in the first nine months of 2020. In this period, stock prices declined sharply before recovering. Preliminary data indicate that the commitment to contribution activity continued at the high rate observed in the first nine months of other years. Most DC plan participants stayed the course with their asset allocations despite high stock market volatility at the end of the first quarter of 2020. DC plan participants' loan activity edged down in the third quarter of 2020, perhaps partly reflecting the use of CRDs instead of loans.

Source: Ici.org, November 2020

Emergency Savings = Better Retirement?

Of all the statistics about financial anxiety, one of the most alarming is that 41% of Americans in 2017 reported that they would be unable to meet an unexpected $400 expense without borrowing or selling a personal item. Alarming, yes, but what does that have to do with retirement? A great deal. There are two ways a financial emergency can undermine retirement and why plan sponsors may want to consider taking action.

Source: Blackrock.com, November 2020

2020 DC Consultant Study: Retirement Environment

T. Rowe Price, in partnership with Schaus Group, completed a survey of the nation's 20 leading defined contribution consulting firms, representing over 5,500 plan sponsor clients and $3.9T of assets under advisement. The objective was to understand the view of DC consultants related to retirement and DC matters driving their business, market trends, and plan sponsor decisions.

Source: Troweprice.com, November 2020

What's Next? The Post-Election Future of Employee Benefits Policy (Retirement Policy Edition)

Retirement policy has experienced more bipartisanship than most areas of legislative activity and that is likely to continue. However, a Democratic White House, despite a Republican-controlled Senate, improves the prospects for consideration of many Democratic priorities. A Biden administration will also mean a shift in the regulatory agenda. This is a 16-page detailed summary of the probable impact of a Biden presidency on retirement policy.

Source: Americanbenefitscouncil.org, November 2020

Should You Establish a Retirement Plan Governance Committee?

Retirement plan governance is the system through which key decisions are made about strategy and operations, including plan design, administration, and investment choices. Typically, at the core of plan governance is an official plan governance committee. Although the DOL and IRS do not require a plan to have a plan governance committee, it is considered a best practice to have one.

Source: Orba.com, November 2020

How the Coronavirus Is Affecting Retirement Saving

The coronavirus pandemic has caused upheavals in the markets, the workplace, and the home. What will be the effects on retirement savings? The coronavirus pandemic is exacerbating an already troubling societal retirement saving shortfall as workers look to long-term retirement savings to solve short-term financial problems.

Source: Troweprice.com, October 2020

White Paper: A Retirement Dashboard for the United States

Because most workers change jobs (and hence retirement plans) multiple times during their career, developing a comprehensive picture of one's retirement preparations can be challenging. Other countries have developed national, online retirement "dashboards." These are websites that not only include a registry or tracking system but also offer expanded functions such as recovering and consolidating lost accounts, projecting estimated future income, expanding financial literacy, and providing unbiased financial advice to users. This paper discusses the possibilities for a retirement dashboard for the United States.

Source: Brookings.edu, October 2020

Most Boomer Investors Are Confident About Their Retirement Despite Pandemic and Market Uncertainties

Amidst a global pandemic, economic uncertainties, and an election looming, Boomers invested for retirement are confident that they will still enjoy their golden years. According to the Charles Schwab 2020 Modern Retirement Survey, more than 80 percent of both those who have retired and those who are soon-to-retire are satisfied or confident their lifestyle will be everything that they envision.

Source: Businesswire.com, October 2020

The Evolving DC Landscape: The Expanding Role of OCIOs

New research from PGIM sheds light on the use of outsourced chief investment officers by defined contribution plan sponsors. In a divergence of opinion, OCIOs seem to underweight their expertise in implementing institutional-quality structures, indicating that the top reasons for being hired by their clients were the perceived mitigation of fiduciary risk and the plan sponsors' lack of resources.

Source: Pgim.com, October 2020

Regular Contributions Help Participants Reach Higher 401k Account Balances

Consistent retirement plan participants, or those who had retirement plan accounts at the end of each year from 2010 to 2018, are generating steady savings in their account balances, according to a study from the Employee Benefit Research Institute.

Source: Plansponsor.com, October 2020

Report: What Does Consistent Participation in 401k Plans Generate?

This paper provides an update of a longitudinal analysis of 401k plan participants drawn from the EBRI/ICI 401k database. A few key insights emerge from looking at the 1.9 million consistent participants in the EBRI/ICI 401k database over the eight years from year-end 2010 to year-end 2018.

Source: Ebri.org, October 2020

Combined 401k Plan and IRA Balances by Age and Time

Owning both a 401k plan and an individual retirement account leads to larger balances, but missed opportunities to contribute and leakage reduce those balances. One-page report.

Source: Ebri.org, September 2020

Women's Retirement Confidence Has Ebbed Since Start of Pandemic

Nearly a quarter, 24%, of women who are working or who have recently lost their job say their confidence in their ability to retire comfortably has declined amid the pandemic, according to "Women and Retirement: Risks and Realities Amid COVID-19," a report by the Transamerica Center for Retirement Studies. A mere 17% of women say they are very confident they will be able to fully retire with a comfortable lifestyle.

Source: Planadviser.com, September 2020

Workers Need Help on Retirement Income

Roughly 33% of retirement plan participants are not sure how long their retirement savings will last, according to Charles Schwab's "2020 401k Participant Survey" of 1,000 currently employed 401k plan participants. This uncertainty jumps to 40% for women, compared with only 25% of men. Half said they would benefit from financial advice.

Source: Planadviser.com, September 2020

How the Coronavirus Pandemic Is Affecting Retirement Saving

The coronavirus pandemic is exacerbating an already troubling societal retirement saving shortfall as workers look to long-term retirement savings to solve short-term financial problems. While the percentage of participants taking advantage of CARES Act provisions such as distributions and expanded loan options is low, doing so may undo years of retirement savings. Solutions like financial wellness can help shape future financial behaviors when balancing and reconciling short-term needs and long-term financial goals.

Source: Troweprice.com, September 2020

The Growing Burden of Retirement

Addressing the twin retirement challenges of more risk and rising costs, along with the decline in overall retirement savings, will require a concerted societal effort. This 24-page report offers a roadmap to the various hurdles that make retirement security difficult to achieve. Stepping back and viewing the entire picture of the different retirement challenges can help to understand just how much the burden has grown.

Source: Nirsonline.org, September 2020

Evaluation Scorecard for Retirement Income Products

Retirement income strategies are the most recent innovation to hit the participant-directed retirement industry. Just a few years ago, target-date funds were new and untested. Plan sponsors and their consultants needed to develop a framework for evaluating that new strategy. The same creativity must now be applied to these new retirement income strategy products. In this paper, the authors have attempted to outline the criteria that they believe should be evaluated and offered some guidelines on how the evaluation should be conducted.

Source: Newportgroup.com, September 2020

2020 401k Participant Survey Part II: Retirement Saving and Spending

The area where 401k participants say they could most use help is understanding how much they'll need to save for retirement, according to a nationwide survey of 1,000 401k plan participants from Schwab Retirement Plan Services. Over two thirds (68%) of participants gave an estimate of how long their retirement savings will last, with the average being 24 years. The remaining 32% say they do not know how many years their retirement savings might last, and the level of uncertainty is higher among women (40%) than men (25%).

Source: Schwab.com, September 2020

T. Rowe Price Publishes Latest Findings On 401k Investor Behavior During Recent Economic Downturns

A recent study by T. Rowe Price found retirement savers who were saving at an adequate rate before the 2008 Global Financial Crisis, and who continued to save throughout the crisis, saw the best outcomes. The 67% of retirement savers who practiced this behavior were able to weather the volatility and stay on track with their savings. Meanwhile, 44% of individuals who lacked retirement savings before the GFC and increased their savings in response to it, still had to consider delaying their retirement 10 years after the downturn.

Source: Prnewswire.com, September 2020

People of Color Report Limited Retirement Investments

Americans who identify as people of color report that they have limited retirement investments and say they're not making progress toward achieving important retirement goals, according to the 2020 Retirement Risk Readiness Study from Allianz Life Insurance Co. of North America.

Source: Planadviser.com, September 2020

Average 401k Continued to Sizzle in August

Temperatures and major U.S. stock indexes, notably the S&P 500, continued to rise. The markets had their best August since 1986 and it was a pretty good month for the average 401k balance as well.

Source: Asppa.org, September 2020

How Might Coronavirus-Related Distributions Impact Retirement Benefits?

The CARES Act allows greater access to defined contribution plan balances. In this 1-page report, EBRI considers the impact on the future retirement security of American workers.

Source: Ebri.org, September 2020

Plan Sponsors Hold the Keys to Boosting Retirement Readiness

Employers play a critical role in motivating their employees to begin saving for retirement. Cerulli's research finds that an employer's matching contribution is the most influential factor motivating participants to begin saving for retirement. Two-thirds (66%) of 401k participants indicate they would be very likely to increase contributions if their employer increased the matching formula (e.g., matches up to 5% instead of up to 3%).

Source: Cerulli.com, September 2020

Few Divorcing Couples Know About QDROs

The GAO sent a report to the Senate Health, Education, Labor, and Pensions Committee, "Retirement Security: DOL Could Better Inform Parties About Dividing Savings," in which it explored how often divorcing parties seek access to their spouse’s retirement savings. The overwhelming result was that very few do. Older couples and women, in particular, are often put at a retirement disadvantage when faced with a divorce, a GAO report finds.

Source: Planadviser.com, September 2020

More Employees are Taking Coronavirus-Related Distributions

The U.S. opened up retirement plans for participant withdrawals under the CARES Act, to act as a temporary solution for those without emergency savings. Almost a quarter of U.S. workers (22%) have borrowed money from their retirement accounts. That's what American Consumer Credit Counseling found in its new financial health index, which measured financial confidence among workers.

Source: Planadviser.com, August 2020

Having Both a 401k and an IRA: How Much Does This Change the Retirement Asset Picture?

Oftentimes, reporting on retirement assets focuses on the average balances of either 401k plans or IRAs. While this provides invaluable information on the behavior within those accounts, it does not show a complete picture of the amount of retirement assets workers or retirees have accumulated. This study helps put numbers to what would be expected to be accumulated given these different traits of workers.

Source: Ebri.org, August 2020

Managed Accounts: A Primer

This 9-page primer is meant to provide an overview of the key aspects of managed account programs today. It includes a review of the basics of managed accounts, a summary of their usage over time, a description of how they can be offered, and considerations for determining if they are right for a particular defined contribution plan, and if so, in what ways.

Source: Dciia.org, August 2020

Do 401k Menus Suffer From a Generation Gap?

A new whitepaper finds that the use of fixed income options in 401k plans has not kept pace with workplace trends. The whitepaper points out that in the past, investment recommendations may have been more focused on achieving minimum compliance and "checking the fixed income box" rather than anticipating participant investment needs at various life stages. A multi-generational participant population has more complex needs.

Source: Napa-net.org, August 2020

SEP, MEP, or PEP: Identifying The Key Differences in Retirement Plans

This 24-page white paper explains the differences between single-employer, multiple-employer, and pooled-employer plans, as well as other group programs for offering retirement benefits.

Source: Ferenczylaw.com, August 2020

The Latest on Participant Behavior During the Pandemic

While various shifts were seen in savings plan contributions and withdrawals in the first few months of the outbreak, there have been some improvements as of late, according to data from Ascensus. In the first few months of the COVID outbreak, the firm reported on a relatively small percentage of retirement plans that had stopped making contributions altogether due to business interruptions. But on a more positive note, as of the end of June, most of these plans have shown encouraging signs of recovery and are taking steps to return to pre-pandemic levels of savings plan contributions.

Source: Napa-net.org, August 2020

401k Survey Finds Savings Goals and Stress Levels on the Rise

Anxiety about long-term retirement savings is up according to a new survey from Schwab Retirement Plan Services, and so is participant engagement. The nationwide survey of 1,000 currently employed 401k plan participants finds that saving enough for a comfortable retirement continues to be their leading source of significant financial stress. Two in five participants also say they made a change to their 401k account due to COVID-19, citing rebalancing and increasing contribution rates as the most common changes.

Source: Businesswire.com, August 2020

Cost Savings Seen As Main Force Behind 401k Shifts

Changes made to the investment lineups of corporate 401k plans in 2019 reflect U.S. sponsors' ongoing focus on cost savings, a Pensions & Investments analysis of recently released 11-K filings shows. Changes to index fund lineups among plans were prevalent, with many adding to their passive tiers or changing index fund providers, with Fidelity Investments seeing several wins and Vanguard Group seeing some losses.

Source: Pionline.com, July 2020

How Pandemic is Putting More Retirements at Risk

Thanks to a bump from the coronavirus pandemic, now more than half of working-age households in America are not expected to be able to afford their current standard upon retirement. According to a new analysis by the Center for Retirement Research at Boston College, the unemployment caused by COVID-19 has pushed up the share of working-age households not able to afford their current standard of living in retirement from 50% to 55%.

Source: 401kspecialistmag.com, July 2020

Assessing the Effects of the CARES Act on 401k Savings

The CARES Act gives retirement savers added flexibility to access their 401k savings. And while this flexibility is helpful to many workers, it's encouraging that the vast majority have not needed to access their retirement savings and are staying the course on their journey to retirement. Less than 2% of participants had withdrawn assets via coronavirus-related distributions as of May 31, according to How America Saves 2020: The CARES Act. The decision to avoid tapping into retirement savings is consistent with other participant data.

Source: Vanguard.com, July 2020

Despite Challenges, 401k Plan Design Drives Positive Outcomes

Despite a slight decrease, 401k plans that auto-enroll continue to drive far greater participation, according to an annual report that examines the latest trends in participant behavior and plan design. In its 2020 Reference Point report, T. Rowe Price found that in 2019, participation in the firm's auto-enrollment plans was 85.3%, outstripping non-auto-enrollment plans by more than 40 percentage points. Overall, the firm reports that more than 61% of plans at T. Rowe Price automatically enroll participants.

Source: Napa-net.org, July 2020

NEPC's Defined Contribution Flash Poll

In the second quarter, NEPC conducted a flash poll on defined contribution plan sponsor views and reactions in light of COVID-19. The findings quell some of the largest fears about the potentially detrimental impact of the pandemic and economic disruption on retirement savings.

Source: Nepc.com, July 2020

Working Past 62 Improves Retirement Security: Study

Working contract or gig jobs into one's 60s has become a way for many people to retire gradually, and such arrangements are linked to greater retirement security, a recent study found. People who remain in the workforce past 62 in jobs that don't provide health insurance or retirement plans tend to do so after leaving career positions or because they have spent a lifetime in jobs without benefits and have little financial choice but to keep working.

Source: Investmentnews.com (registration may be required), July 2020

Participants Comfortable With Investing, Risk, Tech, Per Survey

DC participants are more likely to identify themselves as investors and more comfortable with risk and financial technology than those not in a DC plan. The comparison suggests that DC plan sponsors have done more than help participants build retirement savings. They have helped build a savings culture where participants are confident about investing, take advantage of financial tools and education, and are willing and able to seek advice.

Source: Blackrock.com, July 2020

Seven Trends in 401k Participant Behavior and Plan Design

How are participants behaving with all that's happening? Is plan design keeping up? T. Rowe Price did a deep dive into its recordkeeping data and surfaced with a few important points.

Source: 401kspecialistmag.com, July 2020

Wave of Coronavirus Hardship Distributions Still Building

Low- to moderate-income retirement plan participants have mostly turned to reducing their spending levels and using credit cards to find financial relief during the pandemic; however, more will be turning to their retirement plans for liquidity, according to research from the nonprofit Commonwealth and the Defined Contribution Institutional Investment Association Retirement Research Center.

Source: Planadviser.com, July 2020

Most U.S. DC Plans Aren't Pausing or Reducing Contributions During Coronavirus: Survey

The majority of U.S.-based defined contribution pension plan sponsors said they haven't felt the need to pause or reduce contributions during the coronavirus pandemic, according to a new survey by the Defined Contribution Institutional Investment Association. While 86% of respondents said they aren't considering suspending matching employer contributions, just 8% said they already have. Meanwhile, 92% said they aren't considering reducing those contributions, with just 3% saying they've done so.

Source: Benefitscanada.com, July 2020

Who Plan Sponsors Rate as Top 401k Plan Providers

Seven in 10 plan sponsors (70%) report they are "highly satisfied" with their 401k plan providers according to a new study released July 1 from Cogent Syndicated. Yet only seven providers total achieved satisfaction marks above the industry average. According to Retirement Planscape, an annual Cogent Syndicated study from human behavior and analytics firm Escalent, Bank of America and MassMutual Retirement were the top firms for "Overall DC Plan Provider Satisfaction" among the top 15 firms eligible to be rated.

Source: 401kspecialistmag.com, July 2020

A Framework for Key Recordkeeping Fee Decisions

Several key recordkeeping fee decisions are important for prudent plan fiduciaries to analyze carefully. More often than in the past, when plan sponsors benchmark their plan fees, they often use the opportunity to evaluate the way fees are allocated to participants and to make changes to the way fees are paid. Three key recordkeeping fee decisions that go directly to the heart of the question of how fees should be allocated across participants are discussed in this article. First is the decision as to the type of recordkeeping fee structure. Second is the decision around using a lowest-cost share class strategy for the investment menu versus a revenue-sharing model. Last is the decision of how to apply revenue sharing when there is an active decision to use that model or when it is unavoidable.

Source: Porteval.com, June 2020

Considerations for Plan Sponsors Looking to Keep Participants After Retirement

DC plan participants are increasingly keeping their retirement balances in the plan after they retire, but plan sponsors interested in retaining those balances must overcome some misperceptions, according to a recent paper by T. Rowe Price.

Source: Asppa.org, June 2020

Retirement Tier Widely Recommended for DC Plans

As more Americans shift from saving to spending in retirement, the majority of consultants of large 401k plans say plan sponsors should add a retirement tier and retiree-focused investment options to retain retirees and to help them manage their assets in retirement. A retirement tier is a range of products, solutions, tools, and services to support participants who are near, entering or in retirement.

Source: Plansponsor.com, June 2020

What Constitutes Retirement Plan Leakage

Previous studies substantially overestimate leakage from retirement accounts, according to a new analysis of tax data by Investment Company Institute economists Peter Brady and Steven Bass. The economists define "leakage" as early withdrawals from retirement accounts used for non-retirement purposes. While this is good news, the analysis still reveals that retirement account leakage is a big problem. And the types of retirement plan distributions weeded out for the economists' definition of leakage raise a question.

Source: Planadviser.com, June 2020

Retirement Plan Providers Failing to Deliver Needed Guidance Amid Heightened Volatility and Complexity, Survey

There has never been a more challenging time to invest for retirement. A combination of unprecedented market volatility and complex new rules involving contributions, withdrawals, and tax implications have exposed a need for increased guidance and advice on the part of retirement plan providers. Additionally, with record job losses in recent months, much of the money accumulated in these plans may potentially be lost if participants choose another provider for a rollover. According to the J.D. Power 2020 U.S. Retirement Plan Participant Satisfaction Study few providers are successfully addressing this growing need.

Source: Businesswire.com, June 2020

Are 401k Menus Out of Balance?

Amid historic market volatility, a new survey of retirement plan sponsors and retirement plan advisors reveals gaps in focus and perception about the role of fixed-income investments in a fully diversified 401k menu. The new survey found that equity options outnumber fixed income by approximately 3:1 on plan menus, regardless of plan size.

Source: Asppa.org, June 2020

New Research Collaboration Combines 401k and Spending Data on a Large Scale for the First Time

In a first for the industry, EBRI is working with J.P. Morgan Asset Management to extract detailed insights into people's behaviors around spending and saving to help policymakers, plan sponsors, and plan providers improve retirement outcomes, utilizing their various databases. The effort leverages 22 million Chase households and 27 million 401k plan participant records, offering the first truly holistic view of how U.S. households spend and save.

Source: Prnewswire.com, June 2020

Few Use CARES Act to Tap Retirement Savings

After the CARES Act was signed into law at the end of March, retirement plan sponsors prepared for an onslaught of COVID-19-related distributions and loans to employees hard hit by the pandemic. But few plan participants have exercised their options to tap retirement plan savings under the new relaxed rules, according to two new reports.

Source: Investmentnews.com (registration may be required), June 2020

More Companies May Cut 401k Matches

The pandemic is affecting one of the best perks of workplace retirement-savings plans: company matches to employee 401k contributions. Many firms in the hard-hit hospitality and retail industries have already suspended, reduced, or deferred matches. As of late April, 12% of 816 companies with a total of 12 million workers had suspended matching contributions, according to a Willis Towers Watson survey. An additional 23% said they will or may halt them this year. Companies see suspensions as a way to boost cash flow and avoid or limit job cuts.

Source: Investmentnews.com (registration may be required), June 2020

401ks Are a Source of Cash in Pandemic

The U.S. retirement savings system has always been a little leaky. But the leaks seem to be getting bigger. Some Americans are eyeing withdrawals from their 401k plans as the best of a few bad options for paying their rent or solving other cash-flow problems. As of May 8, 1.5 percent of retirement plan participants had taken some money out of their 401k plans under new federal legislation permitting penalty-free withdrawals, The Wall Street Journal reported. An April survey by the non-profit Transamerica Institute put the number of savers responding to the pandemic much higher, about one in five.

Source: Bc.edu, June 2020

Analysis Finds Nearly Three Decades of Retirement Savings Growth

A recent analysis that draws on data from two sources offers insights on retirement savings over nearly 30 years and prospects for the future that bode well. In "Changes to Household Retirement Savings Since 1989," American Enterprise Institute Resident Scholar Andrew Biggs concludes that by more than one measure, retirement savings have been -- and will continue to be -- on a positive trajectory.

Source: Napa-net.org, June 2020

Analysis Shows Prior Estimate Vastly Overstates Retirement Plan "Leakage"

The term "leakage" refers to early withdrawals from retirement accounts used for non-retirement purposes. Previous studies substantially overestimate leakage from retirement accounts according to a new analysis of tax data. The new analysis finds that a reasonable estimate of leakage is the amount of distributions subject to penalty for early distributions under the tax code and that such penalized distributions account for only around half of taxable distributions received by taxpayers younger than age 55.

Source: Ici.org, June 2020

Divorce Seen as Heavy Contributor to Early 401k Withdrawals

Compared to large purchases, Americans were more likely to take early withdrawals from their retirement accounts during a divorce or after losing a job, according to research by the University of Michigan. Mortgage payment distress was also a major factor leading families to withdraw funds, according to a working paper by economists Frank Stafford of the University of Michigan and Thomas Bridges of the University of Delaware.

Source: Napa-net.org, May 2020

DC Plan Response to CARES Act Varied by Industry and Recordkeeper, Survey

Callan conducted a mid-April survey to assess what defined contribution plan sponsors have done in response to the CARES Act and the recent economic turmoil spurred by the pandemic. The survey includes responses from 63 non-government plan sponsors, and in general, found that plan sponsor actions were primarily influenced by the industry they are in and the actions taken by their recordkeeper.

Source: Callan.com, May 2020

Retirement Preparedness Is Top Concern Among Employers, According to New Fidelity Study

Fidelity Investments announced the results of the 11th edition of its Plan Sponsor Attitudes Study. According to the study, the top concern among 1,500 plan sponsors was whether their plan is effectively preparing employees for retirement financially, consistent with previous years. In late March, in the midst of market volatility and the COVID-19 pandemic, Fidelity also surveyed nearly 1,000 plan sponsors that recordkeep with Fidelity, and their top concern was employee financial well-being.

Source: Businesswire.com, May 2020

Participants Show Surprising Confidence Despite COVID-19

The annual BlackRock DC Pulse Survey, which takes the measure of plan sponsors, participants, and occasionally retirees, was complete by February 2020, just before COVID-19 pandemic-inspired volatility sent the market into a steep drop. This provided a unique opportunity to return to the survey population to discover what, if anything, had changed. This is a look at the key findings.

Source: Blackrock.com, May 2020

DC Plan Participants Continue to Save During COVID-19 Pandemic

Americans continued to save for retirement through defined contribution plans early this year despite uncertain market conditions during the COVID-19 pandemic. The study tracks contributions, withdrawals, and other activity, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans.

Source: Ici.org, May 2020

Vanguard Says DC Losses Not So Bad In Long-Term View

The market declines investors faced in the first quarter as a result of the coronavirus pandemic are much more muted when compared to a longer time frame. That's the key takeaway from a just released Vanguard paper.

Source: Pionline.com, May 2020

Summary Table and In-Depth Analysis of COVID-19 Legislation

To assist employers and public retirement systems with the myriad of changes, Ice Miller has cataloged the provisions of the FFCRA and CARES Act that impacts employer-sponsored retirement plans, health plans, and other benefits in a table format. They have summarized the statutory provisions as well as related regulatory guidance that has been issued as of the date of this publication. The table includes a high-level discussion of the law and practical considerations. For a more in-depth analysis, they have provided a comprehensive discussion of each provision.

Source: Icemiller.com, May 2020

Amid COVID-19, More Employers Are Easing Access to 401k Assets Than Cutting Matching Contributions

A majority of U.S. companies are making it easier for employees to access their 401k plans' assets even as some companies are cutting matching contributions amid the COVID-19 pandemic. These findings are according to the latest pulse survey by Willis Towers Watson. A total of 816 employers participated in the COVID-19 Benefits Survey, which was conducted during the week of April 20, 2020. Respondents employ 12 million workers.

Source: Willistowerswatson.com, May 2020

So Far, Easing 401k Access Prevails During COVID-19 Pandemic

Many employers are taking steps to make it easier for employees to access their 401k plans under the CARES Act, but some are considering more drastic action, according to new survey results. Nearly two-thirds of respondents (65%) in the latest pulse survey by Willis Towers Watson increased access to in-service distributions from participants' 401k accounts while 16% either plan to or are considering doing so this year.

Source: Napa-net.org, May 2020

CITs Fit Well With Best Interest Service

A new white paper published by Wilmington Trust documents the dramatic ongoing expansion of the U.S. collective investment trust marketplace. Among the attractive but less-often-discussed features of collective investment trusts is the fact that the sponsoring trustee -- a bank or trust company -- must commit to acting in the best interest of unitholders.

Source: Planadviser.com, April 2020

Adoption of 401k Auto Features Climbs, but Growth May Slow

A new study finds that a significant percentage of plan sponsors have embraced the use of automatic plan design features, but adoption may have plateaued to some degree. The DCIIA plan sponsor survey reveals that 69% of plans currently offer auto-enrollment, up from 60% in 2016. And that finding generally holds for both large and small asset-size cohorts. Nearly three-quarters (73%) of plans with over $200 million in assets have now adopted the feature, up from 67% in 2016, while 63% of plans with less than $200 million in assets have now adopted it, up from 51% in 2016.

Source: Napa-net.org, April 2020

Implementation of Auto Features Continues to Rise as Plans Recognize Benefits, Survey

The survey, conducted by DCIIA's Retirement Research Center, represents the views of 175 defined contribution plan sponsors and is based on year-end 2018 data. Fifty-seven percent of the respondents represent plans with assets greater than $200 million. The remaining 43% of respondents have less than $200 million in plan assets. This report offers observations relative to prior survey findings, where applicable, and provides historical perspectives on how sponsor behaviors and attitudes towards auto features have developed over time.

Source: Dciia.org, April 2020

DC Plan Sponsor Fiduciary Torch Is Brighter and Can Help Light Dark Days

Defined contribution plan sponsors are putting more importance on their fiduciary duties, based on results from a recent survey. It also saw more plan sponsors turning to third parties for guidance as well as a growing appreciation for professional training and fee transparency. This is especially welcome news as sponsors face the disruption of their plans and their participants are grappling with market unsettledness caused by the coronavirus crisis.

Source: Alliancebernstein.com, April 2020

How Coronavirus Has Impacted Retirement Confidence

Workers' overall confidence in their ability to live comfortably in retirement remains steady, while the share who feel very confident continues to increase, according to the 2020 Retirement Confidence Survey from the Employee Benefit Research Institute and Greenwald & Associates.

Source: Planadviser.com, April 2020

401k Assets Down, But Savings Levels Up: Fidelity

The average 401k balance fell by 19% during the first quarter, according to data released Friday by Fidelity Investments. Despite the negative returns in the stock market and historic volatility, people continued to save, and many either increased their 401k contribution levels or opened up their first individual retirement accounts, the company stated.

Source: Investmentnews.com (registration may be required), April 2020

Bridging the Gap Between Accumulation and Decumulation for Participants

Defined contribution plan participants are increasingly keeping retirement balances in the plan, and a growing number of plan sponsors are interested in retaining these balances. Information gleaned from focus groups suggests that participants have misperceptions about the value of staying in plan. Some participants do not even know that staying in the plan is an option after retirement. If plan sponsors want to maintain retirees in the plan, they should not keep it a secret. They must engage with participants early and often.

Source: Troweprice.com, April 2020

DC Plan Sponsors Reacting With Moderation to Coronavirus

The coronavirus pandemic and its effect on the stock market caused speculation in the retirement plan industry about whether plan sponsors would react with changes to their retirement plans as they did in past market crises. There was also concern about how the market drop and subsequent reaction would affect participants' retirement security. A PLANSPONSOR survey finds relatively few are taking action to suspend or decrease contributions, and they are prudently relying on providers for guidance.

Source: Plansponsor.com, April 2020

Revisiting Retirement Plan Designs After the Global Pandemic

As we move through the pandemic crisis, there is hope that we will eventually be able to resume our normal lives and create better organizations and systems. With the SECURE Act, employers who sponsor DC retirement plans now have (1) new participant disclosure obligations; (2) the ability to adopt certain portability design features related to lifetime income investment options; and (3) guidelines to encourage the inclusion of lifetime income investment options in plan investment line-ups. Plan sponsors and fiduciaries should become familiar with the mandatory requirements as well as the optional aspects of these rules and determine how to leverage them to ease employee retirement concerns.

Source: Westminster-consulting.com, April 2020

Ten Important Facts About 401k Plans

In 1981, the Internal Revenue Service (IRS) proposed regulations for 401k plans that allowed pretax contributions to be made from employees' ordinary wages and salary. In the first years of these rules, employers typically offered 401k plans as supplements to their defined benefit plans. Almost four decades later, 401k plans have grown to become the most common employer-sponsored defined contribution retirement plan in the United States. Here are ten important facts about 401k plans.

Source: Ici.org, April 2020

More Than 40% of 401k Plan Participants Lack an Official Source of Retirement Advice

With approximately 10,000 Baby Boomers retiring each day, the need for financial planning and advice is greater than ever, according to Cerulli. The sheer volume of retirees provides an opportunity for advisors to expand their services to more individuals approaching retirement as they navigate the complex set of decisions ahead. Cerulli's research indicates that many 401k plan participants (including half of the participants in their 50s) lack an official source of retirement advice, and this "advice gap" is particularly acute for investors in lower wealth tiers.

Source: Cerulli.com, March 2020

Reimagining the Participant Experience for a Digital World

The retirement industry is in a period of upheaval. Several trends are converging at once, prompting retirement providers to rethink their business model and approach to participant engagement. This 16-page report examines the trends driving change and provide practical strategies for reimagining the participant experience in a digital world.

Source: Broadridge.com, February 2020

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