Participants January 20, 2022

Record-Low 401(k) Trading Seen in 2021

The Alight Solutions 401(k) Index shows net 401(k) trading activity for 2021 was 0.53% of balances, the lowest annual figure measured since tracking began in 1997.

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Alight Solutions has published both the December and 2021 year-in-review updates for its 401(k) trading index, showing a low rate of trading by retirement plan investors for both the month and the full year.

In fact, net 401(k) trading activity for 2021 was 0.53% of balances. This is the lowest level of trading on record for the Alight Solutions 401(k) Index, which started in 1997, and well below 2020’s value of 3.51%.

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The index shows December continued 2021’s trend of light trading among 401(k) investors. On average, 0.01% of balances were traded daily, with more than 80% of days seeing investors favor fixed income over equity. Trading inflows mainly went to stable value funds, bond funds and money market funds, while outflows were primarily from target-date funds (TDFs), company stock and large U.S. equity funds.

After reflecting market movements and trading activity, the average asset allocation in equities increased from 70.3% in November to 70.7% in December, according to the index. On the other hand, new contributions to equities decreased from 69.7% in November to 68.3% in December.

Overall, the index update notes, Wall Street had another banner year in 2021. For their part, 401(k) investors were infrequent traders and were mostly content to watch their balances grow. There were only three days of above-normal trading activity notched during the entire year—a stark contrast to the 47 seen in 2020, when the market was much more volatile. When trades occurred, the index shows, they tended to see people in “profit-taking mode,” that is, moving money from large-cap U.S. equities and TDFs into more conservative investments, such as stable value and bond funds.

According to the index, 401(k) investors increased their equity exposure from 67.7% at the beginning of the year to 70.7% at the end of the year. This is primarily due to light trading activity during the year, new contributions overwhelmingly favoring equities and near-record highs in equity markets. For context, the last time a year closed with an equity percentage over 70% was 2000 (at 73%).

Products January 19, 2022

Verity Launches Retirement Plan Governance Platform

The new platform for 403(b) and 457(b) retirement plans is targeted to address challenges in tax-exempt and governmental employer retirement plans. 

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Verity Asset Management, a registered investment adviser (RIA), has launched a new plan governance platform, Vynntana, for eligible retirement plan sponsors and plan participants. 

Vynntana was launched for 403(b) and 457(b) employer plan sponsors, eligible plan participants (i.e., employees of K-14 public schools, colleges, churches, governmental agencies and nonprofits) and investment providers.

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The platform aims to offer plan sponsors a system providing best practices and plan management to enable investment committees to make informed decisions that can benefit participants’ retirement readiness, says Al Otto, national director, plan governance solutions for Vynntana.

“The service gives plan sponsors a set of tools to control the environment, and to do things appropriately from a best practice perspective,” he says. “It will put plan sponsors in control of their messaging and can lead to much improved outcomes for teachers and administrators in retirement.”

Tax-advantaged, employer-sponsored 403(b) and 457(b) retirement savings plans are offered to government and nonprofit employees. These plans are not subject to Employee Retirement Income Security Act (ERISA) standards that govern 401(k) plans.

MetLife previously launched a digital retirement enrollment platform for 403(b) and non-ERISA plans early last year.

Verity says it created its plan governance platform for plan sponsors’ comprehensive plan management and oversight, with a process that includes help from independent experts. The platform allows every party to engage and collaborate to better plan performance, with the service incorporating an open architecture platform providing a single point of entry to support multi-provider plans.

The governance platform uses an evaluation process to improve retirement plans for participants. The process begins with a five-step review based on behavioral governance research and strategies that inspect plan governance; plan design; operational compliance; investment management; and participant engagement.

Otto adds that plan sponsors and retirement plan advisers using Vyntana can likely benefit from a “plan management system enabling committees to make informed decisions that have a positive impact on participants.”

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