Public Sector Employees Favor Default Investment Offerings

MissionSquare findings emphasize the importance of well-designed default options in securing retirement outcomes.

Public sector employees overwhelmingly accept default investment options in their defined contribution retirement plans, with more than 80% of participants across all age groups opting to remain in the default selection, a new study from MissionSquare Research Institute found.

This emphasizes the importance of plan sponsors selecting well-designed default options for securing retirement outcomes, according to the report. 

“Default Investment Acceptance Among Public Defined Contribution Plan Participants” examined how demographic and economic factors influence investment decisions. 

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When plan sponsors automatically enroll employees in a DC retirement plan, they are placed into a predetermined investment lineup, typically a target-date fund or a stable value fund. While some participants choose to customize their investment allocations, the majority stick with their default selection for years. 

Acceptance of default investments declines with age and income, according to the report. Younger, lower-income participants exhibit the highest acceptance rates, with 97% of new enrollees in these demographics sticking with default options. In contrast, older, higher-income participants have the lowest acceptance rate: 69%. 

Female participants are more likely to accept default investments than male participants, with the most significant differences occurring at higher income levels. The study also found that economic downturns influence default investment decisions, particularly among older participants.  

During the volatility caused by the COVID-19 pandemic in 2020, default investment acceptance rates among those aged 60 to 70 dropped to about 50% from nearly 90%, while younger participants’ investment choices remained stable. 

Public sector employees who initially accept default investments rarely change their allocation, with an opt-out rate of only 1% per year. However, opt-outs are more frequent among older and higher-income participants. 

The study emphasized the need for public sector retirement plan administrators and advisers to carefully design default investment options to support long-term retirement security. 

“Since public sector DC plan participants are more likely to accept and stay within default investments, plan administrators and advisers should take more responsibility/actions for designing default options that would better facilitate participants making appropriate saving and retirement planning decisions,” the report stated.  

Moreover, MissionSquare’s analysis suggested that strategies to encourage participants, especially those who initially opted out, to periodically reassess their default investments could help optimize retirement outcomes. 

The study examined data from approximately 340,000 newly enrolled public sector DC plan participants between 2020 and 2023, primarily focusing on those using target-date funds as default investments, with some plans incorporating stable value funds. 

Chavez-DeRemer Shows Support for Union Pension Assistance Law in Confirmation Hearing

President Donald Trump’s nominee for secretary of labor expressed support for the Biden-era Butch Lewis Act, but also walked back her support for pro-union legislation.

President Donald Trump’s nominee for secretary of labor, former Representative Lori Chavez-DeRemer, faced questions from members of the U.S. Senate Committee on Health, Education, Labor and Pensions during Wednesday’s confirmation hearing.

While retirement issues were not at the forefront of the hearing, Chavez-DeRemer did offer her support of the Butch Lewis Act, passed as part of the American Rescue Plan Act of 2021, which allows the Department of the Treasury and the Pension Benefit Guaranty Corporation to provide grants to multiemployer defined benefit pension plans.

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The ranking member of the Senate HELP Committee, Senator Bernie Sanders, I-Vermont, said the Butch Lewis Act prevented the earned pension benefits of some 2 million union workers and retirees from being cut by as much as 65% and said there are members of Congress who seek to undo the law.

As of January 15, the PBGC reported providing $70.9 billion in special financial assistance to 109 pension funds covering more than 1.3 million retirees.

The committee’s chairman, Senator Bill Cassidy, R-Louisiana, also asked Chavez-DeRemer about her support for helping independent contractors and small business owners gain access to more affordable health and retirement benefits. Chavez-DeRemer said she would commit to working with the committee on this issue.

The SECURE 2.0 Act of 2022—the most expansive retirement-related legislation in more than a decade—was not discussed during the hearing, despite employers still awaiting further guidance on how to implement some of its provisions.

Cassidy and many other committee members questioned Chavez-DeRemer—whose father was a member of the Teamsters Union—on her support and sponsorship, while she was in Congress, of the Protecting the Right to Organize Act of 2023, which sought to make it easier for workers to unionize. Chavez-DeRemer largely walked back her support for the legislation, saying that as a representative for Oregon’s 5th congressional district, she “wanted to be at the table” and did not want to be “left out of the conversation” when discussing issues related to the American worker.

While the PRO Act sought to override “right-to-work” laws, which exist in 27 U.S. states, Chavez-DeRemer said, when questioned by Senator Rand Paul, R-Kentucky, that she no longer supports the aspect of the PRO Act that would have overturned state right-to-work laws.

“I recognize that that bill was imperfect, and I also recognize that I am no longer representing Oregon as a lawmaker,” Chavez-DeRemer said during her opening statement. “If confirmed, my job will be to implement President Trump’s policy vision … ensuring a level playing field for businesses and, most importantly, the American worker.”

When asked if she would support raising the minimum wage, Chavez-DeRemer said she could not weigh in on this issue because it would be up to Congress to determine.

“I do recognize that the minimum wage hasn’t been raised since 2009, and the cost of living has gone up,” she said. “But again, I cannot sit here and determine that what that wage will be fully and fairly.”

Sanders also brought up the issue of Trump firing Gwynne Wilcox, a Senate-confirmed member of the National Labor Relations Board, during his second week in office, leaving the NLRB without a quorum. When asked whether she thought Wilcox’s termination was illegal, Chavez-DeRemer said Trump has the right to exercise his executive power how he sees fit. She said the functioning of the NLRB is important but did not express any concerns about its current lack of a quorum.

Senator Patty Murray, D-Washington, as well as many other Democratic committee members, expressed concerns about Elon Musk’s role in the Trump administration and the Department of Government Efficiency Service Temporary Service Organization’s attempt to gain access to sensitive Department of Labor data and systems.

When asked if she would protect the private information of people whose records she would be overseeing as labor secretary and if she would allow others to access to that information, Chavez-DeRemer said she would protect the private information but reiterated that she has not been privy to these conversations with the president.

Several senators also brought up the rise of child labor law violations, as the department’s Wage and Hour Division has found a 31% increase in minors employed in violation of child labor laws since 2019.

“Child labor is abhorrent, and nobody should stand for child labor exploitation,” Chavez-DeRemer said on the issue. “I will do everything in my power within the Department of Labor to double down on the safety of all American workers that are exploited, but especially child labor.”

This discussion came on the same day the Trump administration ordered legal service providers working with unaccompanied migrant children to stop their government-funded work.

Senator Jon Husted, R-Ohio, asked Chavez-DeRemer about her view on the impact of illegal immigration on American workers’ ability to earn higher wages, to which she reaffirmed her support of an “America-first” agenda and agreed that “mass immigration has hurt the American worker.”

Chavez-DeRemer must be cleared by the Senate panel before the full Senate can consider her nomination.

More on this topic:

SECURE 2.0: What’s Effective This Year and What Plan Sponsors Need for 2026
Where Does SECURE 2.0 Implementation Stand for 2025?
Plan Sponsors Move Forward (Slowly) With SECURE 2.0 Provisions
PLANSPONSOR Roadmap Series: Catch-Up Provisions
PLANSPONSOR Roadmap Series: Student Loan Matching and Educational Benefits

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