Greetings and welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement.com’s RPA Edge and CEO at TRAU, TPSU & 401kTV - I review all of last week’s stories and select the 5 most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real!
Though an obvious need as DC plans continue to be re-engineered to replace pension plans, the adoption of in-plan retirement income solutions has been slow. But according to a new survey by LIMRA, we may be at a tipping point.
According to their study, nearly 50% of DC plans with 10+ EEs are considering offering an in plan solution with 3 in 4 likely to make a decision in the next 12 months. plans started in the last 10 years and those that offer or have offered a DB plan are more likely to jump in.
But the obstacles remain, which begin with provider reluctance to record keeper another company’s solution, as well as implementing flexible distribution mechanisms and plan sponsor willingness to retain assets of terminated employees.
Anecdotally, more and more plans, especially larger ones, are open to offering a guaranteed lifetime solution some imbedded in TDFs and managed accounts and the new DOL Retirement Security Rule may inhibit the sale of annuities to terminating employees if those advisors or brokers will be considered fiduciaries.
AON is reporting a significant surge in their PEP started in 2021 with assets doubling this year alone. At $2 bn and 70 plans from a diverse group of employers, especially those that are actively acquiring, AON is predicting that 50% of all employers will be in a PEP by 2030.
They claim that participants in their PEP pay half the fees that wd result in 11% more assets when they retire and that employers have to spend less time on administration.
And though not mentioned, PEPs may provide greater protection from lawsuits and DOL fines.
As PEPs accumulate more employers and assets providing scale and technology improves providing flexibility, it is more than likely that group plans like PEPs will grow.
Though ERISA litigation seems to be out of control, their effect has not been all bad as fees have declined and plan sponsors are more aware of their fiduciary responsibilities.
Another effect according to research presented at a recent DCIIA academic forum in NYC is fewer investment options starting in 2010 especially more risky and volatile asset classes.
But as the DC industry tries to replicate returns of DB plans through the use of alternative investments like PE, litigation may cause some plans to think twice.
The honeymoon of many new employees may be over according to a recent Gallup poll with workers changing jobs at historic rates over the past few years. Even with higher wages, more time off, flexible work environments and greater benefits there is a 10% drop in job satisfaction this year alone according to another report.
The culprits? Inflation, being forced back to the office (though just 38% of ERs were requiring it in October compared to 49% at the beginning of the year), and a cooling job market making many feel stuck.
Remote working is a double edge sword. Though some appreciate the flexibility, many new to their job, especially less experienced workers, feel alienated with less sense of inclusion and collaboration. One third of workers do not live in the same city as their supervisor.
The pandemic has caused a dramatic shift in workplace dynamics and employers are still scrambling to find the right solutions for their organization as well as the benefits to match those needs.
The word of the year according to Merriam-Webster dictionary is authentic driven by stories and conversations about AI, celebrity culture, and social media. Although clearly a desirable quality, authentic is hard to define and subject to debate — two reasons it sends many people to the dictionary.
Befi dramatically changed DC plans and personal investing because it deals with the reality of how people act. Advisors that are authentic or real without fear of what others might think for another's benefit to let them know of something that is usually hard to discuss, even if it might cost a sale, may be the new coin of the realm.
Read my recent WealthManagement.com column to learn more.
So those were the most important stories from the past week. I listed a few other stories I thought were worth reading covering:
- Voya survey shows disconnect on retirement readiness by participants and plan sponsors
- What’s on tap for public policy in 2024
- Dave Ramsey trashes 4% withdrawal rate and bears the brunt of industry criticism
- Cerulli notes growing demand of financial advice
Please let me know if I missed anything or if you have any comments. Otherwise, I look forward to speaking with you next week on 401kReal Talk.