J.P. Morgan Defined Contribution Plan Sponsor Survey Uncovers Disconnects, Highlights Opportunities to Help Improve Participants' Retirement Outcomes
Jun 19, 2015, 09:44 ET
NEW YORK, June 19, 2015 /PRNewswire/ -- J.P. Morgan Asset Management today released proprietary data from its second comprehensive survey of plan sponsors. The resulting white paper, "Aligning goals, improving outcomes: 2015 Defined Contribution Plan Sponsor Survey Findings," reveals that although plan sponsors have a strong and growing sense of responsibility for helping employees achieve a financially secure retirement, several disconnects exist between the goals they identify for their defined contribution (DC) plans and how they evaluate success. The white paper also presents actions plan sponsors can take to help employees reach retirement with the income they will need.
Developed to better understand what drives retirement plan decision making, the survey of more than 750 plan sponsors first sought to identify the main disconnects between plan sponsor intent and strategy. For example:
- 75% of plan sponsors consider helping ensure that employees have a financially secure retirement to be a highly important goal, up from 59% just two years ago
- Yet, the majority of plan sponsors still rank traditional goals, such as retaining quality employees (83%) and demonstrating a level of caring for them (80%), well above helping employees to achieve outcome-related goals, such as financial security (75%) or the ability to retire at their targeted retirement age (66%)
- What's more, some criteria for measuring outcome-related goals are not yet viewed as top priorities. The percentage of participants with account balances on track to replace 80% of final salary in retirement, while definitely growing in importance, is only ranked very or extremely important by 53% of respondents and remains last on the list of success criteria
"Misalignment still appears to exist between the retirement outcomes plan sponsors want to help employees achieve and the relative importance they assign to different plan goals and success criteria," said Catherine Peterson, Global Head of Insights Programs at J.P. Morgan Asset Management. "While many plan sponsors have taken steps to strengthen their plans, our data shows there is still room for improvement. We believe these disconnects present a clear opportunity for plan decision-makers to help participants meet their retirement goals."
To more closely align intent and outcome, the white paper identifies three actions plan sponsors can take to help ensure participants are able to retire with adequate income: 1) Adopt automatic enrollment to encourage employees to save; 2) Adopt automatic contribution escalation to encourage employees to save enough; and 3) Adopt solutions and strategies like target date funds and re-enrollment to encourage employees to invest appropriately. The paper takes a closer look at re-enrollment, specifically the strategy with the most room for improvement in adoption, to understand what's preventing plan sponsors from implementing the strategy. In fact, results showed that, to date, only 7% of plan sponsors have conducted a re-enrollment.
When asked why they have not conducted a re-enrollment, several misperceptions and the opportunity for further education were revealed:
- 28% of plan sponsors have considered it but are comfortable with their plan's overall asset allocation (yet 53% are not confident in their participant's overall asset allocation)
- 12% of plan sponsors have considered it but believe re-enrollment is too risky from a fiduciary perspective (not surprising given 53% of respondents are not aware of the potential to receive fiduciary protection for conducting a re-enrollment)
What's holding plan sponsors back from doing more? It could be the strong focus on participant choice versus plan sponsor direction. Less than half (44%) of respondents describe their philosophy on driving participant decisions as proactively placing participants on a strong savings and investing path.
"We hear from plan sponsors every day that they encourage participants to save and invest wisely. But, the reality is participants just aren't doing it themselves. Plan sponsors have an opportunity to set participants up for a higher likelihood of success by implementing strategies that proactively place participants on the right path," said Anne Lester, Global Head of Retirement Solutions and 2014 Morningstar U.S. Fund Manager of the Year for the JPMorgan SmartRetirement suite of target date funds. "To be successful, plan sponsors need to select a plan design and investment strategy that can help move the needle and ensure participants get across the finish line with enough saved for retirement."
Enabling plans to fulfill their crucial role in providing retirement security requires further evolution and a concerted effort from all parties involved:
- Participants need to save more and be more engaged in planning for retirement
- Employers should strengthen plans while continuing to meet responsibilities as business leaders and fiduciaries
- Plan Providers and advisors need to be the proactive partners that plan sponsors rely on for innovative ideas and industry best practices
- Policymakers should motivate individuals to save and invest and help employers shoulder the fiduciary responsibility
To access the full white paper and to explore the findings by plan size and theme, visit our new interactive website at jpmorgan.com/dcresearch.
J.P. Morgan Asset Management conducted an online survey of 756 plan sponsors was conducted in January 2015 with Mathew Greenwald & Associates, a market research firm based in Washington, D.C.
Each respondent was a key decision maker with respect to their organization's DC plan. All companies represented have been in business for at least three years, offer a 401(k) or 403(b) plan to their domestic U.S. employees and have at least 10 full-time employees.
Below are breakdowns of our sample of plan sponsors, both by plan assets and by organizational role. Results aggregated across plan size categories were weighted to reflect the size distribution of plans in the U.S. DC plan universe.
About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of $1.6 trillion, is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.4 trillion and operations in more than 60 countries. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
J.P. Morgan Asset Management is a leading provider of comprehensive retirement solutions and is dedicated to improving individual retirement outcomes. The firm has defined contribution assets under management of nearly $146 billion, as of March 31, 2015.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide.
SOURCE J.P. Morgan Asset Management
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