Fiduciary Awareness Among DC Plan Sponsors Continues to Slip
NEW YORK, NY, December 5, 2017 -- AllianceBernstein L.P. ("AB") today announced new research showing that fiduciary awareness among defined contribution (DC) plan sponsors has deteriorated significantly in recent years. Even though all survey participants qualified as plan fiduciaries, nearly half (49%) of plan sponsors did not consider themselves fiduciaries, a troubling increase from AB's last survey in 2014.
The good news is that there is a growing recognition among sponsors of how hard it is to effectively educate participants about retirement investing, and many sponsors are continuously refining their investment offerings and plan design, including conducting reenrollments with a qualified default investment alternative (QDIA) to improve workers' retirement savings and confidence.
"By 2060, nearly 24% of the US population or close to 100 million people will be over the age of 65, but few Americans are prepared for retirement. What's equally concerning is that plan sponsors now face added responsibilities under the DOL's new fiduciary rule, yet they're less aware of their fiduciary status today than before, and because of legal ramifications, what you don't know can hurt you," said Jennifer DeLong, Head of Defined Contribution at AB. "These are clearly challenging trends in the DC landscape that require action and change. Plans and sponsors will need to consider all the comprehensive tools available today, for the benefit of plan participants, as well as their own."
Key findings include:
One way to boost fiduciary awareness and appreciation is to hire a financial advisor or consultant. Sponsors who use a financial advisor or consultant have a better understanding and awareness of their fiduciary responsibilities. More plans using advisors also show increased participation rates (49% vs. 40% for non-advisor plans), increased average savings (57% vs. 37% for non-advisor plans), and participants improving their retirement readiness (22% vs. 11% for non-advisor plans).
With fees coming under greater scrutiny each year, one-way plans could find cost savings is by using collective investment trusts. Roughly 40% of plans still use first-generation, off-the-shelf proprietary mutual funds but the industry is seeing rapid growth in collective investment trust series.
But cash-outs at retirement are a growing concern in an America of increasing life expectancy and decreasing retirement readiness. One in five plan sponsors would prefer participants leave their money in the plan. If they do, the plan could negotiate better fees by virtue of higher balances. And plan sponsors could explore offering a variety of distribution options -- such as guaranteed lifetime income solutions -- to ensure participants have appropriate options to take them through retirement.
For a copy of AB's report: https://www.alliancebernstein.com/investments/us/retirement/inside-the-minds-of-plan-sponsors.htm
AB is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private wealth clients in major world markets.
At September 30, 2017, AB Holding owned approximately 35.2% of the issued and outstanding AB Units and AXA, a worldwide leader in financial protection, owned an approximate 64.9% economic interest in AB.
Additional information about AB may be found on our website, www.alliancebernstein.com.
Click here for more material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues on 401k plans.
This is a press release provided by the company mentioned or its representatives. Although 401khelpcenter.com may edit the release for editorial consistency, spelling, grammar, punctuation, or other editorial issues, it is not the author of the press release. Use of any information obtained from this release is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com.