SURVEY SAYS: Least/Most Effective Retirement Industry Developments in the Last 25 Years

In April, PLANSPONSOR magazine will celebrate its 25th birthday.

Last week, I asked NewsDash readers, “Which retirement industry development over the past 25 years do you think has been the most effective for improving retirement outcomes and which do you think has been the least effective?”

 

More than half of responding readers (56.5%) work in a plan sponsor role, more than one-quarter (28.3%) are TPAs/recordkeepers/investment managers, and 15.2% are advisers/consultants.

 

The No. 1 pick for developments in the retirement industry respondents think has been THE MOST effective for improving retirement outcomes is the adoption of automatic enrollment for defined contribution (DC) plans (48.9%). This is followed by the increase in the move to daily valuation of retirement plans from monthly, quarterly, annual, and the focus on financial wellness education, each chosen by 10.6% of respondents.

 

“Introduction of Roth retirement plan deferrals” was selected by 8.5% of responding readers, 4.3% chose “increase in availability of calculators for savings and retirement income,” and 2.1% each selected “increased adoption of cash balance plans” and “Supreme Court Dudenhoeffer decision taking away presumption of prudence for company stock in DC plans.”

 

“Other” responses included:

  • Automatic enrollment PLUS automatic escalation
  • Accelerating vesting schedules an automatic rollovers of small distributions.
  • decrease in fees
  • rise in prevalence of 401(k) plans
  • THE INTERNET!!! Giving people access to knowledge and information. Also, the ability to share information. Participants are no longer dependent from the plan sponsor or the financial advisor for information. They are empowered now to learn on their own. Not everyone may take advantage of this and many still need information or prompting from a plan sponsor to consider retirement issues—that time arrives faster than you may think.
  • Introduction of safe harbor to 401(k) plans to pass testing

 

As for developments in the retirement industry respondents think has been THE LEAST effective for improving retirement outcomes, the top selection was increase in move from defined benefit (DB) plans to DC plans (45.6%), followed by increase in pension transfers to insurance companies (17.4%) and increased focus on retirement income options by regulators (10.9%).

 

“Increase in the number of funds on retirement plan investment menus” was selected by 8.7% of respondents, “implementation of qualified default investment alternatives (QDIAs) for DC plans” was chosen by 4.3% of respondents, and “introduction of Roth retirement plan deferrals,” “adoption of automatic enrollment for DC plans,” “increased adoption of cash balance plans,” “new regulations for 403(b) plans,” “Supreme Court Dudenhoeffer decision taking away presumption of prudence for company stock in DC plans,’ and “increase in availability of calculators for savings and retirement income” were each selected by 2.2% of respondents.

 

In verbatim responses, some readers elaborated on why they chose what they did for the MOST effective retirement industry development, and some elaborated on why they selected what they did for the LEAST effective. Many thanks to those who left birthday wishes. Editor’s Choice goes to the reader who said: “Many positives in last 5 years, more awareness. Enjoy this publication.”

 

A big thank you to all who responded to the survey!

 

Verbatim

Quarter of a century old! Happy 25th!

I have anxiety about under-prepared, retired Baby Boomers overburdening an already stressed entitlement system. Happy birthday PLANSPONSOR! You’re a wonderful resource and also very entertaining!

There was a great article in the Wall Street Journal quite a while back about the man who started the 401(k) movement. He now regrets doing so because of that being a large factor in the demise of DB plans and the negative impact on most workers’ retirement security.

Congrats on your 25th anniversary! Great source of information. Regarding retirement industry developments, there is no one thing that helps prepare individuals for retirement except for the individual choosing to defer some of their income for their future over expensive toys, vacations etc. Auto enrollment, Auto Increase and age appropriate Retirement Funds are the foundation to building the assets needed for retirement. To truly be retirement ready individuals must make budgeting an increased deferral the #1 item on their list. To do that, they need to understand that sometimes you can’t take semi-annual cruises, travel overseas, buy expensive “toys” and go out to eat ( or drink) every night. Building a retirement account, and an emergency fund and budgeting for necessities such as a place to live, insurance, child care and so forth should come before too many expensive vacations. I am constantly hearing from the millennial generation that they do not have any extra money in their budget to save for XXX or purchase snow tires ( as an example) right before they tell you that they are booked a 10 day trip to Italy or cruise to Alaska. Planning for Retirement should be a bigger priority.

Happy Birthday. Things have sure changed over the years. Much easier to get instant answers for employees now

While automatic enrollment has increased plan participation, it doesn’t go far enough. Default rates need to be higher and there needs to be changes made to the loan and withdrawal provisions of plans.

Happy Birthday! I have been a subscriber for about 15 of those 25 years and you all continue to keep me informed.

When I started in this business, I personally went to the client’s location and sat down with each participant individually and asked them to put money away for retirement and they responded. Today, some of those rank and file employees are sitting on account balances approaching $1 million. With today’s race to the bottom on fees and services, no one is asking people directly to save and providing one on one education. Now, it is all self-serve, and most people aren’t stepping up to the buffet, or only nibbling if they do.

The Roth has been the greatest development in 25 years. Wish I had had that when I was starting out. Appreciate the inclusion of the Roth inside the 401(k).

I just wish that those making the rules and the requirements were actually the people who have to administer the benefits. Some requirements just take a toll on my patience and ability to really help people save for retirement. For example, why do I have to fill out a form and reflect the issue on our 5500 as well as file a VCP when I need to return money to someone who contributed to two plans during the year and needs a refund after April 15th. Way to complicated, just let me give his money back. Better yet, bring back DB plans and we can all retire at some point in our life and allow younger generations to get jobs and progress. We have too many people still working WAY past their prime because they can’t afford it. These are the people who create more paperwork for me because they make more mistakes!!

The NewsDash is the finest daily update I receive, the one thing I start every day with. Kudos on 25 years!

Happy Birthday! Looking forward to the next 25 years of your service.

Congratulations on 25 years!

Happy 25th Birthday!

As someone on the cusp of retirement, I am happy to see focus shifting to drawing down of savings and annuity options in DC plans. Late for me, but good for those following me.

Happy birthday!

Many positives in last 5 years, more awareness. Enjoy this publication.

 

 

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.

«