Data & Research June 27, 2011

Financial Planning Benefit Offerings Have Increased

Employer-sponsored retirement plans continue to shift away from defined benefit (DB) plans toward defined contribution (DC) and Roth 401(k) savings plans, according to SHRM’s 2011 Employee Benefits report.
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Overall, DC retirement plans were the most common type of plan offered (93%), followed by Roth 401(k) savings plans (31%), traditional DB pension plans (22%) and cash balance pension plans (8%). In addition, 11% offered supplemental executive retirement plans (SERPs). The only retirement savings and planning benefit that was offered by fewer organizations in 2011 compared with 2007 was the DB pension plan (open to all employees). Twelve percent of all companies reported their DB plans were frozen, making them unavailable to newly hired employees.  

Forty-one percent of organizations automatically enrolled employees into their DC plans unless employees actively opted out, 15% provided automatic escalation of salary deferral amounts for the plans, and 1% offered 401(k) debit cards. Organizations also offered financial planning benefits such as individual investment advice (42%) and retirement preparation planning advice (37%).   

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Five percent reported offering a phased retirement program (a reduced schedule and/or responsibilities prior to full retirement), which offers older workers a way to ease into retirement while passing along institutional knowledge to others.  

Even though the percentage of companies that offered defined contribution plans continued to increase, there was a slight decline in the percentage of companies that offered employer-matching contributions, the report said. Seventy percent of organizations provided an employer match on some or all of the employee’s contributions. Sixty-nine percent of organizations offered DC plan loans.  

Although the percentage of HR professionals that reported their companies have been negatively affected by the economic recession has slightly decreased over the last year, there has been a slight increase in the percentage of respondents reporting their benefits offerings have been negatively affected by the economy. In 2011, 77% reported their employee benefits offerings had been negatively affected (12% reported being affected to a large extent and 65% to some extent). This is a 5% increase over the last year. 

Organizations spent on average 19% of an employee’s annual salary on mandatory benefits, 19% on voluntary benefits and 11% on pay for time not worked benefits. More than eight in ten (81%) organizations reviewed their benefits programs annually, and 7% reported reviewing them even more frequently. Only 2% of organizations never reviewed their benefits programs.

The report can be downloaded here.

Products June 27, 2011

Brinker Capital Adds ETFs to DC Platform

Investment management firm Brinker Capital has announced that seven exchange-traded funds (ETFs) have been added to its defined contribution (DC) retirement plan offering.
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The addition provides plan participants with the advantages of both active and passive portfolio management. Brinker Capital will be offering the funds in collaboration with their recordkeeper, Professional Capital Services, LLC. The new program is already available to Brinker clients.  

The asset allocation within each portfolio is divided into fixed income, real assets, absolute returns, domestic equity, private equity, and international equity, and that exposure to alternative investments is directly related to investor risk tolerance. Mutual funds will be used where appropriate ETFs are not available or where active management has a significant competitive advantage.  

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The ETFs are based on strategies with graduated levels of risk and reward, including:  

  • Defensive: Predominately fixed income with a small equity component and some exposure to alternative asset classes.  
  • Conservative: Low volatility with some growth potential.  
  • Moderately Conservative: Moderate level of volatility with the opportunity for long-term growth of capital.  
  • Moderate: Long-term capital appreciation with a moderate level of volatility.  
  • Moderately Aggressive: Maximize long-term capital appreciation.  
  • Aggressive: Heavily allocated to equity, with smaller allocations to fixed income and alternative asset classes.  
  • Aggressive Equity: Mostly investments in equity, with a small allocation to alternative asset classes.  

“Over the past several years, ETFs have become one of the fastest-growing segments of the asset management industry and are an increasingly popular investment vehicle for both professional and retail investors,” said John Coyne, president of Brinker Capital. “Despite this popularity, not many retirement plan managers have figured out a way to incorporate ETFs into 401(k) plans because of trading complexities. After years of research and a technology build-out, we’re pleased to be offering these investment vehicles in our Defined Contribution plans.” 

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