PSNC 2012: Building a Better Retirement Plan Menu

Jon Hale, managing consultant/portfolio manager at Morningstar Associates LLC, said sponsors prefer simple plans that have a “clearly understood blueprint” that makes it easy for participants. “We seem to fairly frequently get these requests,” he said.

Henry Yoshida, principal at Maresh Yoshida 401k Group, agreed that a simplified menu is best. He does encourage plan sponsors to implement a brokerage window, however, although he said most participants do not use it. But for the most part, his approach is “offering more with less,” he said.

Regarding the use of stable-value funds versus money market options, Yoshida said he encourages traditional money market funds because they take a participant-centric approach. A money market fund is more transparent with easier-to-understand options. “It’s just easier for us to recommend the easier, simplified investment choice,” he said.

Roy Kaiser, senior financial planner/retirement plans analyst at Marshfield Clinic, said he has used stable-value funds for awhile but added that the downside is their complicated nature. “So it’s quite a job to understand the mechanics of the stable-value fund,” he said.

The panelists said plan sponsors are interested in retirement income options but are waiting for more product development first. Many are concerned about the portability of retirement income solutions and whether the income guarantee infrastructure has long-term sustainability, Yoshida added.

“They’re not comfortable enough to basically just go into a full-scale income product,” he said.

As an alternative to retirement income, recordkeepers are developing monthly withdrawal features for 401(k) plans, Yoshida said.