The employer-sponsored retirement plan—an invention of the 20th century—has undergone several rounds of legislative, technological, and operational evolution. Yet, it has endured and continues to be as important as ever. At the end of 2012, Americans had $5.1 trillion in employer-sponsored defined-contribution retirement plans, accounting for 9.1% of U.S. household financial assets.1
For advisors and employers alike, 21st century changes to employer-sponsored retirement plans have meant keeping up with the latest on multiple fronts—from advances in smartphone technology to changes to fee-disclosure rules. They've also meant smarter options for managing retirement plans.0
Over the next several weeks, Ascensus will examine the benefits of these retirement plan changes via a series of blog posts. Follow along to find out if you and your clients are taking advantage of everything that 21st century retirement plan tools have to offer.
20th Century Retirement Plan
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21st Century Retirement Plan
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Depends on enrollers and employee meetings to enroll participants
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Uses automatic enrollment plans to automatically enroll eligible employees
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Offers a limited number of funds
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Uses an open-architecture platform to create investment menus from a wide range of investment options
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Needs to perform continual due diligence and research on all investments, even if it’s not a strength
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Relies on expert independent research and recommendations for fiduciary protection
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Periodically solicits proposals from several providers to ensure that costs are reasonable
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Validates value through independent, third-party benchmarking services
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Relies on manual deferral increases to boost savings rates among participants
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Uses convenient auto-increase feature to automatically increase participants’ savings rates
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Allows participants to manually diversify and rebalance their accounts
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Works with an advisor to offer automatic rebalancing, models, and target-date funds so participants can balance and diversify based on their personal risk profiles and goals
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Focuses on capital preservation
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Offers qualified default investment alternatives to help employees get more out of their retirement savings
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Lets participants manage their own accounts
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Gives participants the option to self-manage accounts or provides access to professional investment management
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Provides generic information on benefits of investing to drive participation
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Sends targeted participant-specific communication to help employees plan for retirement
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Concerned with deferral amount rather than employee goals
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Provides goal-oriented savings tools to help participants measure retirement readiness
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1 Source: Retirement Assets Rise 8% in 2012: ICI, www.advisorone.com