Participants March 29, 2017

Millennials Want Employer’s Help with Retirement Savings

DC participants under 30 are among the strongest proponents of TDFs, as well as auto-enrollment and auto-contribution escalation features, a new study finds.
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A new defined contribution (DC) plan study by J.P. Morgan Asset Management indicates that Millennials under 30 are strong proponents of automatic features in 401(k) plans, and they generally believe their employers should play a direct role in helping them choose the right investments.

“Our research found that Millennials under 30 typically need and also want guidance from their employers, and prefer a DC plan structured to simplify investment decisions,” explains Catherine Peterson, global head of insights programs, J.P. Morgan Asset Management. “Getting these young employees on the right track now, early in their careers, can allow the benefits of consistent saving and age appropriate asset allocation to compound over their working lives. The good news is, those under 30 recognize the challenge they face in saving and investing for retirement and appear very receptive to the knowledge, tools and guidance that employers and advisers can provide.”

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The study found that 69% of Millennials under 30 would describe themselves as “do it for me” investors who prefer to leave the complexities of asset allocation strategies to professional managers. Only 56% of those above the age of 30 reflect this notion. Those under 30 are also more likely than those above 30 to appreciate receiving notifications from their employer indicating whether they are saving enough (62% of those under 30 vs. 34% of those 30 and older).

J.P. Morgan notes, “These young employees, less experienced in managing their own finances, and admittedly a long way from retirement, are more likely to assign at least some degree of responsibility to their employers for helping them save for retirement (82% vs. 73% for those 30 and over). What’s more, half of those under 30 think their employer has an obligation to help them choose the right investments, compared with only 22% of their older colleagues.”

In addition, the firm found this group is the strongest proponent of the “automatic 401(k)” or a DC plan that utilizes features such as auto-enrollment and qualified default investment alternatives (QDIA) such as target-date funds (TDF).  

And despite some plan sponsors’ reluctance to adopting automatic features due to fear of employee push back, J.P. Morgan found that 84% of Millennials under 30 are in favor or neutral to automatic enrollment and 86% feel the same way toward automatic contribution escalation. This group is close to unanimous (97%) in its support of TDFs and re-enrollment (93%), the study found.

J.P. Morgan Asset Management’s full paper, “Three things to know about DC plan participants under 30,” can be found here. 

Compliance March 29, 2017

Fiduciary Rule Delay Under Final Review

Experts warn that plan sponsors may face their own set of challenges if and when the DOL fiduciary rule is overturned by the new administration. 

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Reports have emerged that the Trump White House has submitted the final version of a rule to delay the implementation of the Department of Labor (DOL) fiduciary rule adopted by the previous president but left to the current leadership to implement.

The Office of Management and Budget (OMB) is among the many federal agencies that do not actively broadcast their activities; the news comes from an updated regulation tracking page on the OMB website. That page shows OMB, the entity tasked with analyzing the budgetary and economic impacts of new regulations and laws, received the text of the final version of the delay order on March 28.

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A variety of sources have suggested the 15-day comment period allowed on the proposed version of the final fiduciary rule delay measure was shorter than either precedence or prudence would seem to dictate—yet the administration argued its hand was forced by the rapidly approaching deadlines assigned by the outgoing Obama administration. Indeed, it would not be easy or enjoyable for advisory firms and their plan sponsor clients to come into compliance with the stricter DOL standards, only to see them rolled back weeks or months later.

Assuming the final version will closely resemble what was proposed and commented on, it is important to note this new delay rulemaking does nothing to actually declaw the fiduciary rule and its related prohibited transaction exemptions. It is simply a measure to give the DOL more time to decide how to proceed.

It will certainly help bring clarity to the entire effort once the president’s Labor Secretary nominee is (finally) installed. Readers will likely recall the botched effort to install Andrew Puzder to the position. Now the expectation is that the new nominee, former member of the National Labor Relations Board R. Alexander Acosta, could be confirmed as soon as this week. Acosta and his deputies will then have to decide how to proceed in terms of actually removing the fiduciary rule.

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