Benefits August 16, 2013

Institutionalizing DC Plans Can Help Sponsors, Participants

August 16, 2013 (PLANSPONSOR.com) – By institutionalizing their defined contribution (DC) plans, plan sponsors can give their participants better retirement outcomes, a paper contends.
Reported by

According to “Institutionalizing DC Plans: A Starting Point for Addressing Fiduciary Issues,” from the Defined Contribution Institutional Investment Association (DCIIA), institutionalizing a DC plan can also result in better fiduciary and risk management profiles for plan sponsors and fiduciaries.

“In the simplest possible terms, institutionalizing a defined contribution plan is about designing and structuring the plan with a focus on promoting positive outcome for the plan participants,” Lew Minsky, executive director of DCIIA, told PLANSPONSOR. The paper explains institutionalization as “a broad outcome-oriented mindset that applies beyond investment options and proposed a hierarchy of institutionalization levels for DC plans that included governance, funding, investment structure, engagement and education, and distribution and decumulation.”

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

The paper builds upon material from a 2011 DCIIA paper, but discusses each hierarchy from a fiduciary perspective, said Minsky. “By doing this, the paper provides plan sponsors and their advisers issues to consider and actions to implement in order to develop a plan that delivers positives outcomes for participants and minimizes fiduciary risk for plan sponsors and other plan fiduciaries. It is an actionable and detailed, step-by-step guide to designing and managing a plan, which shows that you can manage fiduciary risk and deliver positive outcomes. It is our hope that plan sponsor and advisers will use this framework in managing their plans, which will ultimately lead to improved outcomes for participants.”

While the paper talks about a number of actions and processes that plan sponsors should consider, said Minsky, the key message is that these elements are part of an overall process that will benefit both plan sponsors and participants.

Some of the steps recommended by the paper include:

  • Governance – Determine the plan process, document plan decisions, and update plan and governance documents;
  • Funding – Plan sponsors should ask questions such as why they are sponsoring the plan, how they are maximizing the plan’s effectiveness and how they are structuring the plan for the best participation and contribution levels. To that end, the paper recommended steps such as automatic plan features and determining appropriate deferral rates;
  • Investment Structure – Conduct an investment structure review, change the investment menu to reflect diversification or to simplify choices into tiers, consider the level of investment assistance needed, update trust agreements, examine QDIA and re-enrollment issues, and research investment options;
  • Engagement and Education – Provide targeted communications to participants; and
  • Distribution and Decumulation – Review and develop a retirement income solutions strategy.

More information about the DCIIA paper can be found here.

Benefits August 16, 2013

Singles Rely More on Social Security than Marrieds

August 16, 2013 (PLANSPONSOR.com) – Unmarried individuals living alone, both women and men, are more likely to be reliant on Social Security to keep them out of poverty than those who live with families, a study found.
Reported by

Since the majority of older women are single, while the majority of older men are married, Social Security plays a particularly important role in lifting unmarried women out of poverty, according to the study from the Institute for Women’s Policy Research (IWPR).

Research by IWPR indicates Social Security lifts 14.8 million older Americans (age 65 and older), including more than six million unmarried women and men living alone, out of poverty. More whites (12 million) than minorities (2.2 million) rely on Social Security to lift them out of poverty. Seventy-six percent of women age 75 and older rely on Social Security for more than half their income, compared with 60% of those ages 65 to 74 (for men, 60% and 46%, respectively).

Get more!  Sign up for PLANSPONSOR newsletters.

The study analyzed data from the 2012 Current Population Survey Annual Social and Economic Supplement, which was collected jointly by the Bureau of the Census and the Bureau of Labor Statistics. The findings reported in the study refer to calendar year 2011.

A downloadable copy of the study can be found here.

«