PS: Is there a typical Prudential client, and if so, what does that client look like?
Castineiras: Target markets for our TRS business fall into the corporate and tax-exempt markets. We spend most of our time on plans with $10 million to $1 billion in assets. That’s where we actively participate and keep a strong focus. We are very selective when we go above $1 billion and not well suited to go below $10 million.
Typical clients within Prudential also have more than one retirement platform. We’re very well-suited to handle multiple retirement platforms versus just being a DC player and nothing else.
Paternalistic plan sponsors do well with us because of what we produce—whether its our focus on outcomes or producing income for lifetimes.
PS: What trends are you seeing among your clients?
Castineiras: I think the trends we see are validated across the industry.
On the DB side the requests we get are: Help me solve my DB challenge from a funding, derisking and glide path perspective; Help me make good on the promise that I made to my participants; Help me understand the best time for me to derisk these assets or move these liabilities off of my balance sheet.
On the DC side we have seen an increase in adoption of automatic features, and what I would call the modernization of DC plans to be more DB-like—meaning automatically enrolling participants into a glide path and automatically escalating their deferral rate 2% a year.
That solves for a good part of the population, but not the entire population. We’re seeing a major uptick in nonqualified penetration for plan sponsors.
These plans allow executives to defer some of their income in the future from a tax perspective, and are helping plan sponsors get past any discrimination test and challenges that they’ve had historically. Plan sponsors are combining the DC and nonqualified plans together, and that becomes more and more prominent.