Nearly two-thirds, 64%, of the nation’s top retirement plan
recordkeepers and providers believe that the new Department of Labor (DOL)
fiduciary rule will deter rollovers from retirement plans into individual
retirement accounts (IRAs), thus helping them to retain assets, the LIMRA
Secure Retirement Institute found in a survey.
Just more than one-quarter, 28%, think the rule will help them
increase asset retention, although 36% think it will have no impact. Another
36% think the rule will have an adverse impact on their asset retention rate.
Seventy-five percent say they will change how their call centers respond to
retirement plan distribution options.
“The rollover market is expected to exceed $400 billion in
2016,” notes Matthew Drinkwater, assistant vice president at the LIMRA Secure
Retirement Institute. “Because asset retention is a top priority for defined
contribution (DC) plan providers and recordkeepers, the Institute has been
tracking asset retention practices for years. The DOL fiduciary rule impacts
all qualified assets and will likely have a major impact on the rollover
market, with some DC plan providers benefitting from increased in-plan
retention due to a slowdown in IRA rollover activity.”
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401(k) Participants Want Help Knowing What to Save
Two-thirds of participants surveyed said helping them know how much more they should be
saving or how much they should have in their retirement plan today is a very effective way for an
employer to encourage them to save.
Major reasons 401(k) participants
cite for not saving more money now for retirement are having to pay off
debt (49%); not earning enough (36%); and having other spending
priorities (26%), according to a survey by J.P. Morgan.
Many
participants know they are not saving enough—68% say their 2015
contributions were below where they should have been. In addition, 81%
say they are interested in doing financial planning for retirement, but
nearly half (45%) do not have a plan.
However, 48% of
participants admit they simply do not spend enough time thinking about
and planning for retirement. The survey also found many participants may
not be fully engaged in managing their 401(k) accounts—28% have never
rebalanced their 401(k) account, 31% have never made a change to their
initial choice of investment options, and 18% have never increased their
contribution amount.
Individuals vary in what motivates them to
save, but 67% agree that helping them to “understand their numbers”—how
much more they should be saving or how much they should have in their
retirement plan today to ensure a financially secure retirement—is a
very effective way for an employer to encourage them to save. At least
half (52%) look to their employer to provide a viewpoint about how much
to contribute to their plan, while 41% think they should be notified if
they are not saving enough.
Only 38% are very or extremely
confident in their knowledge about how much to put into their 401(k)
each year to be on track to reach their retirement goals. Only 34% are
very or extremely confident in their knowledge about how to estimate how
much they will have in their 401(k) at retirement if they continue
saving at the same level, and only 30% in how much monthly income their
savings will provide in retirement.
NEXT: Participants receptive to automatic plan features
According to J.P. Morgan, participants appear receptive to trading
some degree of autonomy for plan features and strategies designed to
offer a disciplined approach to saving, simplified investment choices
and improved asset allocation.
Roughly three-quarters of
participants are in favor of or at least neutral toward automatic
enrollment (75%) and automatic contribution escalation (74%). Roughly
two-thirds (67%) are in favor of or at least neutral toward a
combination of these two features. A large majority (90%) find
target-date funds (TDFs) appealing. In addition, most (82%) are in favor
of or at least neutral toward re-enrollment.
Looking at
participants younger than 30, members of this cohort are even stronger
proponents of the automatic 401(k). Additionally, results for “do it
yourself” investors, despite this group’s stated preference for a more
independent approach, do not vary significantly from the others'
averages.
Among those automatically enrolled in their plans, less
than 1% opted out, nearly all are satisfied (96%), and nearly one-third
(31%) say they would not have enrolled otherwise. Among those whose
contribution amounts are/were automatically increased by 1% to 2% each
year, nearly all are satisfied (97%), and 15% say they were unlikely to
have escalated their contributions if not for this automatic feature.
Among
those who went through a re-enrollment, 73% allowed their assets to be
moved to a TDF, and 99% of those whose funds were moved are satisfied.
From
January 12 through January 25, 2016, J.P. Morgan Asset Management
partnered with Mathew Greenwald & Associates to conduct an online
survey of 1,001 defined contribution plan participants. In order to
qualify for the study, each respondent had to be employed full-time at a
for-profit organization with at least 50 employees, be at least 18
years old and have contributed to a 401(k) in the past 12 months.