Retirement Industry Reps Optimistic about Future Trends

November 12, 2008 ( - Despite volatile investment markets, the freezing and terminating of defined benefit plans, and limited formation of new plans, industry representatives consulted by Diversified Investment Advisors say they are upbeat about the industry's future over the next five years.

A Diversified news release said its P rescience 2013: Expert Opinions on the Future of Retirement Plans study attributed this positive outlook in part to the cultural shift from a voluntary benefits approach to automation. Another contributing factor: market growth spurred by employees’ realization that they need to save more money for retirement than originally planned in light of market instability and inflation.

Diversified said the experts were “especially optimistic” about the future of 401(k) plans as more employees become eligible and eligibility periods shorten. In fact, 68% of experts anticipate that participation rates will increase by 10% or more.

The majority of panelists suggest that 77% of plans will offer immediate eligibility for participation; 73% will offer automatic enrollment; 49% will offer immediate eligibility for employer contributions; and 48% will provide for immediate vesting. In addition, they suggest that the demise of defined benefit plans will slow, that only 6% will be terminated, and that 23% will be frozen by 2013.

Phased Retirement

In terms of workforce management, the experts project that 32% of employers will offer phased retirement programs, allowing aging participants to remain employed after they start taking distributions from retirement plans. They also project that 40% of sponsors will include lifetime benefit options in their plans’ investment arrays.

Other key findings of the Diversified study, according to the announcement:

  • Recordkeeping service agreements will gravitate toward per-head charges instead of asset-based fees that have historically been the norm. This new fee structure will also encourage participants to increase their contributions since fees will be reduced as a percent of assets.
  • Globalization will also become a greater factor in the retirement plans market to meet the needs of a globally mobile workforce.
  • Investment options will be under intense scrutiny by plan sponsors, fiduciaries and regulators. For example, target-date funds will come under increased scrutiny by lawmakers, say 70% of experts.
  • Among the biggest shifts in future trends is that retirement plans of the higher education sector will be invested primarily in mutual funds, a departure from tradition, say 67% of experts involved in the project.

The project , conducted in the second quarter of 2008, examined trends in retirement plans with $25 million to $1 billion in assets. Fifty-nine plan experts from 45 organizations nationwide answered the survey.

The individuals polled represent trade associations, research organizations, consulting firms, academic institutions, financial professionals, investment management firms, recordkeepers and trade media.

A copy of the study is available by e-mailing .