Insights: Studies, Research and White Papers
Summary: Karen Smith, a senior research associate at the Urban Institute's Program on Retirement Policy, talks about employer contributions to retirement savings, who benefits most, and who loses the most wages in return for retirement contributions.
Source: Urban Institute, February 2012.
Summary: The 68-page Deloitte 401k Benchmarking Survey is a snapshot into the priorities and associated actions of plan sponsors. It offers a broad view of the priorities, policies, features, objectives and expectations of the diverse population of respondents.
Source: Deloitte 
, February 2012.
Summary: This Hewitt EnnisKnupp report describes next-generation solutions for defined contribution plans. As target-date funds continue to take an increasingly important role in providing improved retirement security within defined contribution plans, more employers are choosing to improve this simplifying innovation through customization.
Source: Aon , February 2012.
Summary: This best practices guide shows how a tailored approach can help employers make the most of their investments in employee benefits.
Source: Principal , January 2012.
Summary: Proactive strategies boost 401k participation by nonnative speakers. Midsize employers have found ways to increase their 401k plan participation rates among employees who speak English as a second language.
Source: Businessinsurance.com, January 2012.
Summary: Yet the Towers Watson 2011 survey on qualified retirement plan governance finds that the process of decision making and oversight varies widely. While most employers are concerned with compliance, many are not taking all the steps available to manage the financial, organizational and other risks created by ineffective plan governance. A sizable number of employers, however, are getting the message.
Source: Towers Watson , December 2011.
Summary: Click to Read Online Many 401k retirement plans allow participants to take loans from their accounts before they retire. However, if they have not paid them off before leaving their jobs, they must pay them in full immediately. Based on a large dataset from Vanguard, this study is the first of its kind to quantify how many people take out loans and, of those, how many default. It proposes changes in retirement policy to reduce the financial risk posed by these loans, particularly for vulnerable groups.
Summary: Nondiscrimination testing is the process of identifying when benefit limits are exceeded. Essentially, nondiscrimination regulations were created in order to prevent retirement plans from discriminating in favor of Highly Compensated Employees. This is a nine page review n nondiscrimination testing.
Summary: After a decade marked by two severe bear markets, 401k plan participants have adopted a more balanced approach to their portfolios, according to a report released today by the ICI and EBRI. Fears that younger participants in 401k plans would abandon stock investing are not borne out by the data, which suggest that greater use of target-date funds is helping workers keep their investing on track.
Summary: The Investment Company Institute and Deloitte Consulting have prepared the second edition of the Defined Contribution/401k Fee Study that was first conducted and published in the 2009 study. Specifically, this report addresses and updates: The mechanics of defined contribution plan fee structures; Components of plan fees; and, Primary and secondary factors that impact fees ("fee drivers").
Summary: Whatever your current method(s) of assessment and evaluation, plan sponsors have long appreciated the reality that, while every program may have its own unique set of circumstances and constraints, there is value in being able to compare your retirement plan designs with a valid set of comparables, if only to ensure that your design remains competitive.
Summary: A just-released survey by Janus found that DC plan sponsors are professing a higher level of confidence in their target-date fund knowledge and offerings compared to a year ago. In contrast to that sentiment, however, the data also revealed contradictory responses and the existence of a significant percentage of sponsors seemingly unaware or unconcerned about areas that could present real fiduciary risk.
Summary: BrightScope published this list of the Top 20 Stable Value Funds by total distribution for the 401k and defined contribution industry. This list is part of a series of rankings BrightScope will regularly publish.
Summary: U.S. companies must act now to engage younger workers in employer-sponsored defined contribution plans if up-and-coming generations are to have a realistic chance of achieving a financially secure retirement, according to this new study from Northern Trust.
Summary: In order to provide perspective on how the new DOL fee disclosure rules will affect plan sponsors in 2012 and beyond, Roland|Criss has published this white paper (part one of a three-part series) that aims to clarify, equip, and empower plan administrators as they navigate through the sea change in their fiduciary roles.
Summary: For years, institutional investors have accepted a 5% real return as an acceptable rule of thumb. Yet a review of asset returns and traditional spending rules shows how difficult it has been to achieve that target. The authors of a new Vanguard research paper suggest what investors can do to improve their prospects of success.
Summary: To measure participant-directed changes in DC plans, ICI has been tracking participant activity through recordkeeper surveys since 2008. This report updates results from ICI's survey of a cross section of recordkeeping firms representing a broad range of DC plans and covering nearly 24 million employer-based DC retirement plan participant accounts as of June 2011. The broad scope of the recordkeeper survey provides valuable inferences about recent withdrawal, contribution, asset allocation, and loan decisions of participants in these plans.
Summary: This paper explores the hypothesis that employer contributions to defined contribution plans may affect total compensation differently for low and high-income workers. Using a longitudinal data set that allows us to measure worker quality based on their prior earnings, we estimate the effects on earnings in new jobs of employer contributions to DC plans.
Summary: Drawing on the opinions of those responsible for the design and oversight of defined contribution plans, this publication—Six key survey findings: Gauging attitudes about target-date funds from plan sponsors and consultants—uses a survey-based framework for examining the key issues surrounding target-date funds today.
Summary: This MetLife Study shows women face a number of unique risks - including longevity, aging single, lower retirement incomes, greater healthcare costs and added care giving responsibilities - and have not planned adequately to address these concerns, leading to a significant shortfall. Women who take charge, do the math, plan for contingencies and work with their partners and/or financial advisors have a better chance of securing their finances in retirement than those who shrink from the process.
Summary: The number of defined contribution retirement plans in the United States offering a sustainable and responsible investing (SRI) choice could double in the next two to three years, according to a new report released today by Mercer and the US SIF Foundation. Here are the key report findings.
Summary: In light of the expanding regulatory requirements, plus increased 401k plan fee and fiduciary litigation, small and mid-sized employers may be looking for options to provide their employees with the benefits of a well managed 401k plan while reducing their administrative burdens and mitigating fiduciary risk. One approach that is gaining wider acceptance among both plan sponsors and their advisers is the "open" multiple employer 401k plan. The purpose of this white paper is to explore the legal bases for establishing, and operational requirements that apply to, the open multiple employer 401k plan.
Summary: Sponsors in all segments of the 403(b) market are looking to their providers as 403(b) partners and experts. Providers offering solutions to help ease plan administration and cost will have a competitive edge. Government regulation and more transparent fee reporting are driving both innovation and consolidation.
Summary: In June 2011, average costs in private industry for retirement and savings benefits -- which include defined benefit and defined contribution plans -- were $1.03 per hour worked, or 3.7 percent of total compensation according to this U.S. Bureau of Labor Statistics report.
Summary: According to a new survey by Anova Consulting Group, small market 401k plan sponsors who have a clear understanding of the roles of their service team members are 31% more likely to be satisfied with their providers than those who do not understand the distinct responsibilities of each team member.
Summary: Since working longer is the key to a secure retirement for the vast majority of older Americans, it is useful to take a look at labor force trends for those under and over age 65 for the last century. Report finds that the downward retirement age trajectory stopped around the mid-1980, and since then it has gradually increased.
Summary: While the vast majority of DC plans offer at least one index fund, they are mostly concentrated in the large-cap segment of the U.S. stock market. Passive funds representing other asset classes are offered in far fewer plans, which may be due to popular misconceptions about the efficacy of indexing in markets that are perceived to be less efficient than large-cap equities. In this paper, S&P Indices considers the basis for this perception, illustrating why they believe it is unfounded for mid-cap equities.
Summary: This Trends & Experience in Defined Contribution plans survey has been conducted every two years since 1991. The 2011 survey was responded to by 546 employers across a variety of plan types, sizes and industries. For purposes of this survey the term Defined Contribution plans include 401k, profit sharing, 403(b) custodial account, 401(a), 457(b) governmental plans, etc. The survey was fielded in the first quarter of 2011, to understand employer trends relating to retirement plan offerings, design, and investments.
Summary: This report documents the negative impact of leakage factors such as cashouts, hardship withdrawals, and loans on defined contribution plan participants' likely retirement income adequacy. It finds that plan leakage can reduce by more than 14 percentage points the probability that low-wage participants will successfully be able to replace most of their income in retirement after 31-40 years of plan eligibility.
Summary: One purpose of this 19 page white paper is to show that this century- old trend toward earlier and earlier retirement is over, and, in fact, has been over for more than two decades. American men and women are now leaving the labor force later than their predecessors did, not earlier, and many more older Americans are working today than prior trends would have predicted.
Summary: The four objectives of this white paper are to: 1) Highlight the plan design features that have been lost in the shift from DB to DC plans. 2) Identify the workforce management challenges posed by the shift from DB to DC plans. 3) Describe how incorporating income solutions into DC plans can help address these challenges. 4) Provide a case study that demonstrates the benefits of incorporating income solutions into DC plans for employers and employees.
Summary: Shifting and uncertain target dates for retirement are becoming the norm in the American workforce, making it harder for employees to establish meaningful financial plans, recent MetLife research indicates.
Summary: A new report released today reveals an encouraging sign that employer confidence is rising and that it appears to be translating into a renewed commitment to retirement benefits for the first time since the recession began.
Summary: For the first time, supplemental industry reports to How America Saves analyze the behavior of plan participants in eight industries, including the ambulatory health care; finance and insurance; information services; legal services; manufacturing; mining, oil and gas extraction; technology; and utility industries. Plan sponsors in these industries can use a new benchmarking tool to compare their plan data with others in their industry and Vanguard plans overall.
Summary: Eighty-five percent of retirement plan advisors are currently performing services traditionally performed by plan fiduciaries, although most are not declared plan fiduciaries, according to a national industry survey of external retirement plan advisors conducted for John Hancock Financial Network by Pulse Logic.
Summary: Is the conceptual design behind Target Date Funds sufficiently robust to warrant the claim of being "the" ideal solution for defined contribution retirement plans? This article aims to make the case for a complete and consistent framework to vet the risk-and-return proposition of TDFs. In particular, financial operators and regulators should re-examine the existing TDF solutions and encourage more accurate disclosure of the expected risks and returns of each product in a manner consistent with (a) rigorous analysis based on commonly accepted financial theory and (b) realistic empirical market evidence.
Summary: The portfolios of nearly 30% of participants in 401k retirement plans at Vanguard are in automatic professionally managed investment programs, which particularly benefit individuals who lack the skills to invest properly on their own, according to Vanguard's How America Saves 2011.
Summary: Bank of America Merrill Lynch released these findings from its Workplace Benefits Report, a new study focused on the role financial benefit plans play in employers' talent management strategies and the overall financial well-being of their employees. The study includes responses from 650 C-level executives, HR and benefit plan leaders and examines ways in which employers are helping to address the financial needs of perhaps the most demographically diverse workforce in history.
Summary: More and more employers are grappling with how to help the Baby Boomer generation address the gap between what they have saved and what they will need to save to comfortably retire. It is a challenging problem. Here's some thoughts.
Summary: Few 401k plans provide for annuities and plan sponsors have been reluctant to expand their menus of plan investments to cover annuities primarily because there has not been significant interest by participants, there are additional administrative issues and because employers are uncomfortable with the possibility of fiduciary risk. In particular, employers and fiduciaries are concerned that they may be sued if the annuity carrier is unable to satisfy its obligations over extended periods of time. As a result, plan sponsors must consider many factors and ask many questions before and after deciding whether to offer annuities. Here is a detail review of the issues.
Summary: A fiduciary is someone who is managing the financial assets of another person, and within a company, there can be more than one fiduciary. If you are offering your employees a 401k plan, then most likely you are a fiduciary, and if you are, you have certain responsibilities by law. Here are five things you should be aware of.
Summary: Total U.S. retirement assets were $17.5 trillion as of December 31, 2010, up 5.2 percent in the fourth quarter of 2010 and up 9.1 percent for the year. Retirement savings accounted for 37 percent of all household financial assets in the United States at year-end 2010.
Summary: The 9th Annual Study of Employee Benefit Trends delivers a clear message to employers: Bolster employee loyalty and satisfaction or economic recovery may arrive with unanticipated setbacks for retention and productivity. This year's findings reveal a workforce that has grown more dissatisfied and disloyal, to the point where one in three employees hopes to be working elsewhere in the next twelve months. Yet employers do not appear to be tuned in to this potential flight risk.
Summary: This is a Q&A with Tom Kmak of Fiduciary Benchmarking and David Witz of Fiduciary Risk Assessment on the significant interest in benchmarking of fees because of the recent introduction of retirement plan fee disclosure regulations and the rise in litigation related to plan fees.
Summary: A well crafted Fiduciary Acceptance and Acknowledgement Form that comprehensively covers fiduciary roles and responsibilities may be the most valuable engagement document in a service provider's arsenal. It is a prudent part of a due diligence process to identify fiduciaries, their roles and their liability. By having this disclosure on file, service providers have the information they need to verify fiduciary status to meet their disclosure obligations.
Summary: Both plan sponsors and participants are likely to be well-served if plan assets are retained in the plan beyond retirement or separation from service. Participants benefit from fiduciary oversight of an ERISA plan and lower expenses. Plan sponsors looking to act in the collective best interests of participants should opt for portfolios with professional, independent oversight with fee transparency.
Summary: Because of recent concerns about significant losses in and differences in the performance of some TDFs, GAO was asked address the following questions: (1) To what extent do the investment compositions of TDFs vary; (2) what is known about the performance of TDFs; (3) how do plan sponsors select and monitor TDFs that are chosen as the plan's default investment, and what steps do they take to communicate information on these funds to their participants; and (4) what steps have DOL and the SEC taken to ensure that plan sponsors appropriately select and use TDFs? This is their report on the questions.
Summary: This paper examines the challenges small businesses face in providing retirement plans for their employees, and potential public and private solutions to ease the burden on small business.
Summary: This paper seeks to better understand the determinants of participant portfolio allocations to target-date funds, whether of the "pure" or "mixed" variety. Researchers use focus group discussions and survey evidence linked to 401k administrative data drawn from Vanguard. They explore rational motivations for portfolio choice decisions, as well as psychological elements such as trust. They also examine the relationship between financial knowledge and portfolio choice.
Summary: The paper begins by providing an overview of ERISA's fiduciary rules as they apply to investment advice. It then discusses the types of investment support that were permissible under ERISA prior to the Pension Protection Act of 2006. It then discusses the PPA statutory prohibited transaction and the proposed regulation implementing that exemption. Finally, it discusses whether the provision of investment advice pursuant to the statutory exemption is likely to benefit plan participants.
Summary: As a practical matter, any covered service provider that has not implemented the 408(b)(2) disclosures by July 16th will be precluded from providing services to its ERISA-governed covered plans. The purpose of this article is to briefly discuss some of the issues.
Summary: An article recently published in a retirement plan industry journal addressed criticisms of the construction of Target-Date Retirement portfolios that are based on a "through" retirement approach. The term "through" retirement implies that the glide-path, the formula by which the portfolio's asset allocation rebalances over time, carries through retirement to death. This strategy is contrasted by the "to" retirement approach, in which the glide-path is designed to end, or become static, at retirement, as opposed to death. Which is right, retirement or death?
