Ten Developments in the Retirement Plan Industry

Executives from MassMutual and Voya Financial discussed trends driving the retirement plan industry.

By Lee Barney | September 13, 2016
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Executives from Voya Financial and MassMutual discussed 10 developments in the retirement plan industry at the 2016 PLANADVISER National Conference’s panel, “Top Trends.”

First and foremost are new regulations and policies, led by the new fiduciary rule, said Charles Nelson, chief executive officer of retirement at Voya Financial. “Each company will approach it differently,” he said. “Some may utilize the best interest contract (BIC) exemption or retreat from offering certain services. At Voya, we will utilize the BIC where it is most appropriate.”

Another regulatory development is open multiple employer plans (MEPs), which have a chance of being “approved in Washington, and that could help us grow our industry,” Nelson said.

Second, is the growing recognition of the cost of employees not being retirement ready. “Many years ago, companies sought to limit their liabilities by freeing their defined benefit plans,” said Tina Wilson, senior vice president, head of retirement solutions innovation at MassMutual. “But that liability still exists if employees don’t have sufficient funds to retire and are financially trapped.”

Sponsors and their advisers need to ensure that participants are “funding their plan adequately,” Wilson said. “Typically, the CFO is not engaged in the plan. We looked at plans with 1,000 employees and found that, on average, it is costing them $2.7 million to $3 million a year in the liability of employees unable to retire. We must measure this cost” and call sponsors’ attention to it.

Third is the need to engineer a retirement plan for success. “401(k) plans were designed to be supplemental,” said Nelson, who then pointed to six ways advisers can help “DB-itize” defined contribution plans. Use automatic enrollment, he said, paired with qualified default investment alternatives (QDIAs) that place participants’ funds into appropriately diversified portfolios. “Optimize the match to ensure people are saving at the right levels. Use escalation, reenrollment and embrace income” options, he said.

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