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Insights: Trends, Research, and White Papers
Immediate Vesting Is Better for Recruitment Than Cliff Vesting Is for RetentionAn Employee Benefit Research Institute research panel focused on employee tenure argued that non-immediate vesting schedules for employer matches are an overrated retention tool. An immediate vest is a smarter recruitment tool, and vesting thresholds can often be outweighed by accepting a higher-paying job elsewhere, according to the panelists. Source: Plansponsor.com, March 2023
Five Notable Participant Behaviors Identified in T. Rowe Price 401k ReportWhile a new T. Rowe Price 2022 Year-End report shows 401k plan participants have largely stayed the course and not significantly changed their loan, distribution, or withdrawal behavior despite the recent turbulent market environment, that doesn't mean there aren't some interesting findings about participant behavior in the research. This article reviews five examples. Source: 401kspecialistmag.com, March 2023
DC Withdrawal Activity Remained Low in 2022: ICIDespite market volatility, inflation, and lingering concerns of a recession, recent Investment Company Institute research shows that defined contribution plan participant withdrawal activity remained low in recent years. According to ICI's research report, 4.1% of DC plan participants took withdrawals in 2022, compared with 4.1% in 2021 and 3.8% in 2020. Source: 401kspecialistmag.com, March 2023
Rethinking 401k Plan Success: The Power of Deferral RatesFrom the beginning of 401k plans, the retirement industry has focused on the performance of individual funds as the key driver of retirement readiness. But a study by the Putnam Institute in 2006 and repeated in 2012 concluded that increasing deferral rates have the greatest potential impact on a 401k participant's account balance at retirement. Source: Retirementplanblog.com, March 2023
Advisers Recommend Fiduciary Outsourcing Services, Mostly for Small PlansPlan advisers often recommend that clients use fiduciary outsourcing services, alleviating the administrative burden on both advisers and clients, according to new industry research. More than 20% of advisers said clients spend between a quarter and half of their time on plan administrative tasks that could be outsourced. Source: Planadviser.com, March 2023
Labor Tightness Drives More Immediate Eligibility for Retirement DeferralsNew Vanguard data shows that 72% of employers allowed for immediate eligibility of retirement saving deferrals in 2021, an increase over the past decade from 58% in 2012, according to its research paper, "The Changing Workforce." Source: Planadviser.com, March 2023
Webinar Recording: DC Plan Trends and Fee Survey OverviewNEPC's DC Practice Group unveils the full results of their 17th Annual DC Plan Trends & Fee Survey. The team highlights current DC plan investment trends, plan features, and how increasing market pressure is transforming DC plan strategies. From the challenges that come with retirement income solutions to the increasing adoption of passive tier options and the growth of the DC plan OCIO market, NEPC's DC consultants break down how they are advising plans to address emerging opportunities. Source: Nepc.com, March 2023
Canadian Women Are 16% Less Confident About Retiring Than Men: SurveyJust over half (52 percent) of Canadian women say they feel financially confident about retiring at their target age, compared to 68 percent of men, according to a new survey by the Bank of Montreal. Source: Benefitscanada.com, March 2023
Over Half of DC Investors Lack Longevity Literacy: NuveenA new report by Nuveen highlights the latest retirement-focused insights in the defined contribution space, including longevity literacy, ESG, and new provisions offered in SECURE 2.0. Source: 401kspecialistmag.com, March 2023
Self-Directed 401ks Also Fell 20% in 2022, Schwab Report ShowsYet another report shows 401k accounts generally took a 20% hit in 2022, although it could have been worse if not for a subtle recovery in Q4. Source: 401kspecialistmag.com, March 2023
The Language of Longevity: How Understanding Prompts ActionFinancial literacy, financial wellness, and now longevity literacy. It's the latest phrase in the fight to raise awareness of -- and preparation for -- later-in-life issues, financial, medical, and otherwise, and an idea the TIAA Institute hit upon during its research. Source: Asppa.org, March 2023
Five Key Themes in J.P. Morgan Asset Management's 2023 Guide to RetirementNew research released today explores top trends in the defined contribution space, including SECURE 2.0 and market uncertainty. J.P. Morgan Asset Management released its annual Guide to Retirement, examining five key retirement themes expected to impact financial advisors, defined contribution plan participants, and clients throughout 2023. Source: 401kspecialistmag.com, March 2023
Participant Retirement Assets Remaining in Plan Have IncreasedDefined contribution retirement plan participants are increasingly remaining in the plan, after terminating employment, new data shows. The Vanguard research analyzed proprietary recordkeeper data on the account distribution decisions made by participants from January 1, 2011, through December 31, 2021. Source: Plansponsor.com, February 2023
Investors Think They Need at Least $3 Million to RetireIt's one of the thorniest financial questions: how much is enough to retire comfortably? The answer is somewhere between $3 million and $5 million, according to the 553 investors worldwide who shared their views in Bloomberg's latest MLIV Pulse survey. About a third of investors pegged it at $3 million, and roughly another third at $5 million. Source: Investmentnews.com, February 2023
Retirement Savers Held Course in 2022 Despite 401k DeclinesWith equity and bond markets down in 2022, most workplace retirement plan savers saw double-digit declines in their portfolios. But according to new data from the Vanguard Group and Bank of America, most participants stayed the course with their retirement savings. Source: Planadviser.com, February 2023
401k Loans and Hardship Withdrawals Decreasing: ReportNewly released data from year-end 2022 shows that the volume and dollar amount of 401k loans and hardship withdrawals decreased, but there were some nuances to the findings. In a new quarterly report that draws on data from more than three million 401k plan participants, Bank of America's 401k Participant Pulse report reveals that fewer participants took hardship withdrawals for immediate financial needs. Source: Napa-net.org, February 2023
7 in 10 Private-Sector Workers Have Access to Employer-Provided Retirement PlansAs of March 2022, 69% of private industry employees had access to an employer-provided retirement plan according to new data released recently by the U.S. Bureau of Labor Statistics. Fifty-two percent of private industry workers chose to participate in a retirement plan, for a take-up rate of 75%. Source: 401kspecialistmag.com, February 2023
Which Benefits Are Valued Most Depends on Age of WorkersA recently released Workplace Wellness Survey found that when it comes to attitudes toward employee benefits, there are large differences by employee age. Indeed, middle-aged employees reported being more likely than younger or older workers to be concerned about various aspects of their well-being. Older workers were, unsurprisingly, focused on retirement benefits. And younger workers highly valued help with day-to-day bills, student loan debt assistance, and career advancement opportunities. This paper explores these benefit preference differences by age in greater detail. Source: Ebri.org, January 2023
Hands Off Our 401ks: Americans Reject Changing Key FeaturesAsked about their views on defined contribution plans, an overwhelming majority of respondents in a new survey say they value the investment opportunity 401k plans provide and are opposed to changing the tax preferences or investment control in those accounts. Source: Ntsa-net.org, January 2023
TDF Flows Jump 35%, but CITs Are Stealing GrowthTarget-date funds continued to reign supreme among retirement savers last year, but new data shows collective investment trust funds may keep them from regaining the heights of a few years ago. Retirement savers boosted TDF contributions in 2022 at a 35% higher rate than in 2021, well off the negative flows seen in 2020 at the height of the pandemic, according to the latest data from investment research provider Morningstar. Source: Planadviser.com, January 2023
Research Shows Workers' Poor Grasp of Target-Date FundsThe MFS Retirement Outlook 2023 survey found gaps between workers' understanding of how target-date funds work and how they function, revealing fundamental misunderstandings that require participant education. These misunderstandings can have implications for saving, investing, and living in retirement, explained Jon Barry, head of client solutions for the investment services group at MFS. Source: Plansponsor.com, January 2023
Employers Yawn at SECURE 2.0 ProvisionsWhile the passage of SECURE 2.0 was largely celebrated and commemorated by the retirement industry, new data from Alight finds plan sponsors were generally aloof on the news. Source: 401kspecialistmag.com, January 2023
Nearly Half of Private Workers Participate in DC Plans: EBRINearly half (48%) of private industry workers in the U.S. participated in a defined contribution retirement plan in 2022, according to the latest figures from the Employee Benefit Research Institute (EBRI). Source: 401kspecialistmag.com, January 2023
How SECURE 2.0 Looks to Increase Plan ParticipationThe SECURE 2.0 has the potential to affect workplace retirement savings in a big way. This article addresses how the new law can increase workplace retirement plan participation and savings rates. Plan sponsors and administrators should take note to keep up with this evolving area. Source: Cohenbuckmann.com, January 2023
What to Keep on Your Radar and Some Predictions for 2023The end of one year and the beginning of the next is traditionally a time to take stock of new developments and compliance issues. Though nobody has a crystal ball, it's also a good time to assess trends and changes likely to occur in the future. Here is a list of items for compliance calendars and some subjective predictions of what to watch for in 2023. Source: Cohenbuckmann.com, January 2023
Morningstar Raises "Safe" Retirement Withdrawal Rate to 3.8%Morningstar's annual model of how much a retiree with a balanced portfolio should withdraw over a 30-year time horizon increased to a starting point of 3.8% on the back of higher bond yields and lower equity valuations. Morningstar researchers say higher interest rates and lower equity evaluations will make starting with a 3.8% withdrawal rate safe for a balanced saver over a 30-year time horizon. Source: Planadviser.com, December 2022
In the Wake of COVID-19, Retirement Savings SurgeBenefits have long been a powerful recruiting and retention tool, and amid a tight labor market, the Plan Sponsor Council of America's 65th Annual Survey of 401k and Profit Sharing Plans found record-high rates of retirement savings alongside innovative plan designs. The survey found participant and employer contribution rates were at all-time highs in 2021 with a combined average savings rate of 13.9% of pay, and 2021 saw the highest employer contribution rate in the history of the survey (5.6% of pay). Source: Napa-net.org, December 2022
DC Solutions Look Beyond Yield for Retirement IncomeThis paper explores how inflation and interest rates impact retirement plan investing when the goal is income generation, rather than asset growth. It examines the impact to current, prominent income-generating strategies and explores approaches to retirement income generation that have begun gaining the attention of fiduciaries and plan sponsors as new tools to help retirees. Source: Dciia.org, December 2022
Work Retirement Study Shows Plan Sponsors Prioritizing 401k Plan DesignMorgan Stanley released new research from its workplace retirement study that highlights retirement plan sponsors are prioritizing 401k plan design amid challenging economic and jobs environment. While the 401k plan continues to be an essential workplace benefit to attract and retain talent, plan sponsors emphasized the need for an attractive plan with a range of features to meet the evolving financial needs of a diverse workforce. Source: Businesswire.com, December 2022
How Does Local Cost-of-Living Affect Retirement?Households across the United States face very different cost-of-living, largely due to variations in housing expenses. Wage levels directly affect retirement security through Social Security benefits. As a result, households in high-cost areas could face a replacement-rate penalty if their employers offer higher wages. The questions are: 1) How large is this penalty in practice? and 2) Do workers respond to the penalty by adjusting their behavior? Source: Bc.edu, December 2022
Nearly 1 in 3 Gen Z Workers Are Not Actively Saving for RetirementA stunning 31 percent of Generation Z workers have saved nothing for retirement over the past two years or so, according to a recent Bankrate survey. The move could ultimately cost them hundreds of thousands in retirement savings and expose them to one of America's top financial regrets, not saving for retirement early enough. Source: Bankrate.com, December 2022
Hot topics for Defined Contribution PlansThis 8-page publication highlights recent and ongoing issues and developments that are relevant to defined contribution plan sponsors. Highlighted are fundamental areas in plan design and administration, participant engagement, compliance and risk, and investments. Source: Buck.com, December 2022
Younger 401k Participants Favor Investment in EquitiesYounger 401k plan participants tend to favor equity investing more than older participants. That's a key finding from a new joint study from EBRI and ICI which found that at year-end 2020, 42% of 401k plan participants' account balances were invested in equity funds, on average, in line with recent years. Another 35% of 401k participants' account balances were invested in balanced funds, largely target-date funds. Source: 401kspecialistmag.com, November 2022
Participants Admit Auto-Enrollment Kickstarts the Retirement Savings JourneyAs more employees ask for retirement planning vehicles in their employer-sponsored plans, a Principal study finds automatic features help participants achieve their largest share of retirement income. The latest research from Principal shows that over half (51%) of 725 respondents attributed auto-enrollment to kickstarting their retirement savings journey, and 81% said it helped them begin saving even sooner. Source: 401kspecialistmag.com, November 2022
How Engaged 401k Participants Are Saving Significantly MoreWhen it comes to 401k participant savings rates, engagement matters, a lot. Engaged participant savings rates are a remarkable 56% higher than rates for unengaged participants, according to Empower's just-released second annual research study, Empowering America's Financial Journey: How People Save, Invest and Get Advice. Source: 401kspecialistmag.com, November 2022
Americans Are Increasingly Directing Attention to Retirement PlansNew findings from Voya Financial show that a workplace retirement plan is just as important for employee retention as a competitive salary and flexible work arrangements. Sixty percent of employees surveyed said they were more likely to stay with their current employer if they offered an employer-sponsored retirement plan, compared to 64% who said they would stay for a competitive compensation package and 63% for flexible work hours. Source: 401kspecialistmag.com, November 2022
Workers React to Retirement Language and ImageryOrganizations are taking a psychological approach to analyze the way Americans think about their retirement. New research from Capital Group studied close to 2,500 American adults and how they respond to retirement language and imagery, confirming a finding that the industry has understood for some time, there is no one-size-fits-all approach to retirement communications. Source: 401kspecialistmag.com, November 2022
Report Urges Pension Plan Fiduciaries to Focus on Finance When Considering ESG FactorsA new report from the C.D. Howe Institute says pension plan fiduciaries shouldn’t ignore climate change and other environmental, social, and governance factors that are relevant to financial purposes. However, when plan fiduciaries use ESG factors to prioritize social or environmental concerns, such as those expressed by plan members, they put themselves on shaky legal ground, said the report. Source: Benefitscanada.com, November 2022
Arbitration of ERISA Plan DisputesThis article discusses the general enforceability of arbitration clauses in certain disputes, including class actions, with a particular focus on the enforceability of arbitration clauses involving legal claims made under ERISA. It also specifically analyzes the advantages and disadvantages of arbitration provisions for retirement plan sponsors. Source: Wagnerlawgroup.com, November 2022
October a Light Trading Month for 401ks: AlightOctober was another light trading month for 401k plan investors, according to the latest iteration of the Alight 401k Index. With just two above-normal trading days, the index revealed stable value funds accounted for over 80% of net inflows, while outflows were primarily from target date funds (37%), company stock (35%), and large U.S. equity funds (12%). Source: 401kspecialistmag.com, November 2022
Callan: DC Plan ESG Use Drops in '22 on Backlash, Rule ConfusionPushback against ESG investing by state governments and some in the investing community led to a drop in use among institutional investors this year, according to research released by fund consultant Callan. In annual surveying of 109 institutional investors on environmental, social, and governance implementation, Callan found just 35% of respondents incorporated ESG factors into investment decisions this year, down from 49% in 2021. Source: Plansponsor.com, November 2022
Self-directed Retirement Plan Participants Allocate Few Assets to In-Plan ESG FundsSelf-directed retirement plan investors infrequently allocate to environmental, social, and governance investments, new research finds. The research, by PGIM and the Employee Benefit Research Institute, examined the allocation decisions of 9,324 new defined contribution plan participants, across 108 DC plans, who are directing their accounts and where there is at least one ESG fund available in the core menu. Source: Plansponsor.com, November 2022
Political Pressure Aside, Asset Managers Stand Pat on ESG IntegrationRegardless of the divided political pressure surrounding environmental, social, and governance investing, asset managers remain committed to considering such factors, with climate change remaining a top priority for firms, a new Cerulli report suggests. Source: Napa-net.org, November 2022 | |||||||
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