View
218
Download
0
Category
Preview:
Citation preview
Retirement Webinar Series | June 26, 2013
The Empowered Fiduciary of Defined
Contribution Plans
Alison Borland, Winfield Evens, Bridget Steinhart
1
Retirement Webinar Series | June 26, 2013 2
Agenda
Section 1 The DC Plan Fiduciary Today
Section 2 Emerging Trends within DC
Section 3 Two Potential Paths to Success
Section 4 Empower Me
Consulting
Governance
DC Nexus
Section 5 Conclusion
Retirement Webinar Series | June 26, 2013 3
Agenda Tracker
Section 1 The DC Plan Fiduciary Today
Section 2 Emerging Trends within DC
Section 3 Two Potential Paths to Success
Section 4 Empower Me
Section 5 Conclusion
Retirement Webinar Series | June 26, 2013
Current Environment
DC plans are overwhelmingly the
primary retirement vehicle for
participants
Current DC plan savings might
not be enough
– Over 40% of plan sponsors lack
confidence in participants’ readiness
– On average, participants are
projected to have a 20% shortfall in
needed retirement savings
Both participants and plan
sponsors have increasing
responsibility within DC plans
55%
64% 65% 67%75%
0%
20%
40%
60%
80%
2003 2005 2007 2009 2011
Is DC the Primary Retirement Plan?
3%
12%
28%
33%
19%
6%0%
10%
20%
30%
40%
6Not
Confidentat All
5 4 3 2 1Very
Confident
Sponsors’ Level of Confidence in Participants’ Retirement Readiness
Source: Aon Hewitt
4
Retirement Webinar Series | June 26, 2013
Current Expectations
5
Fulfill Fiduciary Responsibilities
Limit Litigation Risk
Reduce Costs
Optimize Plan
Retirement Webinar Series | June 26, 2013 6
Increasing Pressures
Plan Sponsor
Significant Media
Attention
Governmental Oversight and
Increase in Audits
Litigation
Continues
Intensifying
Employee Focus Increasing
Employer Attention
Retirement Webinar Series | June 26, 2013 7
Agenda Tracker
Section 1 The DC Plan Fiduciary Today
Section 2 Emerging Trends within DC
Section 3 Two Potential Paths to Success
Section 4 Empower Me
Section 5 Conclusion
Retirement Webinar Series | June 26, 2013 8
Institutionalization of DC Plans
20%
48%
33%
Utilization by Vehicle Type Entire 401(k) Market Aon Hewitt’s Clients
Value of Institutionalization
Reducing investment fees
by 25 basis points has
the same value as…
…increasing the company
contribution 0.5% of pay for
over an employee’s career
Retail Funds
Collective Trusts
Separate Accounts
Source: Cerulli Associates, Aon Hewitt
71%
17%
12%
Retirement Webinar Series | June 26, 2013
Help Solutions
On average, annual benefit of participants
receiving Help is 2.92%, net of fees1
– Difference can have significant impact:
70% more wealth over 20 years
Those who used Help performed better 88%
of the time vs. those who didn’t1
Non-Help participants have substantially wider
range of risk levels2
Biggest mistake is too high risk near retirement
* The “Help” group includes participants who, at the time of the study, had 95% or more of their portfolio in a target date fund, were enrolled in managed accounts, or used
online advice in the prior 12 months and received a recommendation. All other participants were placed in the “Non-Help” group.
1 Aon Hewitt does not guarantee future results. See full disclosures of Aon Hewitt and Financial Engines joint research at the end of the presentation for more information.
2 Comparison of risk ranges of Help Participants to those of Non-Help Participants within each age group, showing middle 50% of risk ranges for each category. Stock Index and
Bond Index shown for reference, reflecting risk levels of S&P 500 Index and Barclays Capital U.S. Aggregate Bond Index, respectively.
9
Retirement Webinar Series | June 26, 2013
Retirement Income Solutions
Solution One Year Ago Today
Institutional Rollover Annuity Platform 62 62
Managed account drawdown plus longevity
insurance
None A dozen live
or in process
In-plan guaranteed minimum withdrawal
benefit None 2 live,
1 in process
Freezing Pension
Plans
Aging of the Baby
Boomers Economic Volatility
10
Retirement Webinar Series | June 26, 2013
Agenda Tracker
Section 1 The DC Plan Fiduciary Today
Section 2 Emerging Trends within DC
Section 3 Two Potential Paths to Success
Section 4 Empower Me
Section 5 Conclusion
11
Retirement Webinar Series | June 26, 2013
Two Potential Paths to Success
Investment Scrutiny Creating Two Paths
Delegate
Select and monitor
the Expert
Rely on Expert for
investment
decisions and
execution of
strategy
Reduce time,
resources
Improve participant
outcomes
» Empower Me
Is personally responsible
for investment decisions
Get trained and partner
with expert resources
Ensure active and
engaged Committee
Maintain complex choice
investment menu and
facilitate education
strategy
Improve participant
outcomes
»
Best-in-Class
Providers
Leverage
Institutional Scale
Manage and
Reduce Risk
12
Retirement Webinar Series | June 26, 2013
Polling Question
Which path do you think best describes your perspective as a
plan sponsor?
13
Retirement Webinar Series | June 26, 2013
Agenda Tracker
Section 1 The DC Plan Fiduciary Today
Section 2 Emerging Trends within DC
Section 3 Two Potential Paths to Success
Section 4 Empower Me
Section 6 Conclusion
14
Retirement Webinar Series | June 26, 2013
Managing the Changing DC Marketplace
15
Former Paradigm
Homogeneous
Accumulation
Generic
More is better
As starting point
Information
“It’s free”
Bi-polar
Emerging Paradigm
Diverse
Retirement income for life
Personalized, directive
Fewer, focused, institutional
As complete path, with guidance
Advice, managed solutions
Per head, baseline
Understood and managed
Characteristic
Population
Success Metrics
Communications
DC Investment Options
Automation
Investment Decisions
Administrative Fees
Risk
Retirement Webinar Series | June 26, 2013
Fiduciaries have personal liability
Not an “honorary role”
– Process is key
– Considerations, and commitments
No place for the “settlor” hat
Committee, Corporate and Advisor Roles
16
Plan Design
Plan Investments
Document
Plan Admin Committee
“Prudent Expert” Expectation
Members are typically finance or HR professionals
Solutions
Always have a thoughtful response to “why”
Governance—”Highest Standard Under the Law”
Retirement Webinar Series | June 26, 2013
Fiduciary Training - know your responsibilities
17
Obligation to monitor investments
Examples not explicitly stated in ERISA:
– Appointment documents
– Gift policy
– Periodic review of the Investment Policy Statement
– Service provider monitoring
– Operational oversight
Potential advantages
Indemnification
Fiduciary liability insurance premiums
DOL audit success
Quality of sleep
Governance—The Best Offense is a Good Defense
Retirement Webinar Series | June 26, 2013
DC Nexus—Increasing Control and Transparency
for Fiduciaries
Empowers plan
sponsors
Creates a proprietary,
industry-first investment
exchange
Drives down fees for
participants
18
Retirement Webinar Series | June 26, 2013
Agenda Tracker
Section 1 The DC Plan Fiduciary Today
Section 2 Emerging Trends within DC
Section 3 Two Potential Paths to Success
Section 4 Empower Me
Section 5 Conclusion
19
Retirement Webinar Series | June 26, 2013
Conclusion
Benefits of Our Solutions, Regardless of the Path
Benefits to
Sponsor
Participant
Risk Client fiduciary risk is reduced
Convenience Comprehensive solution
enables clients to focus on
strategic business issues
Cost World-class portfolios at
wholesale prices increase
investment returns
Financial
Security
Simple sophistication and
best-in-class help improve
performance
Experience Market leading participant
experience provides easy
access and independent help
20
Retirement Webinar Series | June 26, 2013 22
Contact Us
Alison Borland
VP, Retirement Solutions and Strategies
Aon Hewitt
(847) 771.1115
alison.borland@aonhewitt.com
Winfield Evens, CFA
Director of HRO Investment Strategy | Partner
Aon Hewitt | Hewitt EnnisKnupp
(847) 771.6605
winfield.evens.2@aonhewitt.com
Bridget Steinhart
Associate Partner
Hewitt EnnisKnupp
(314) 719.3801
bridget.steinhart@aonhewitt.com
Retirement Webinar Series | June 26, 2013 23
About Aon Hewitt
Aon Hewitt empowers organizations and individuals to secure a better future through
innovative talent, retirement and health solutions. We advise, design and execute a wide
range of solutions that enable clients to cultivate talent to drive organizational and personal
performance and growth, navigate retirement risk while providing new levels of financial
security, and redefine health solutions for greater choice, affordability and wellness. Aon
Hewitt is the global leader in human resource solutions, with over 30,000 professionals in
90 countries serving more than 20,000 clients worldwide. For more information on Aon
Hewitt, please visit www.aonhewitt.com.
© 2013 Aon plc
This document is intended for general information purposes only and should not be construed as advice or opinions on
any specific facts or circumstances. The comments in this summary are based upon Aon Hewitt's preliminary analysis of
publicly available information. The content of this document is made available on an “as is” basis, without warranty of any
kind. Aon Hewitt disclaims any legal liability to any person or organization for loss or damage caused by or resulting from
any reliance placed on that content. Aon Hewitt reserves all rights to the content of this document.
Recommended