To help participants grow their balances, employer-sponsored DC plans are also incorporating behavioral finance concepts into plan design and architecture by automating systems.
“Now we see automatic enrollment, we see target dates, we see managed accounts that are becoming more complex and having more options as baked into defined contribution plans,” says Deb Dupont, assistant vice president for retirement plans research at the LIMRA Secure Retirement Institute. “All of these things make it much easier and in fact [a] more passive decision on the part of the participant.”
Legislation, including 2019’s Setting Up Every Community for Retirement Act, has also eased plan sponsors’ responsibilities when selecting an insurer to offer annuitization options for participants’ decumulation stage. The safe harbor has prompted sponsors to increasingly build lifetime income options into their plans to provide retirement income certainty. And prior to the SECURE Act, the Pension Protection Act of 2006 led to widespread adoption of qualified default investment alternatives, including target-date funds, which helped DC plans incorporate ideas from DB plans, Dupont adds.
Author(s): Noah Zuss
Publication Date: 9 Feb 2022
Publication Site: Plansponsor