Defined Contribution Investment Perspectives
Plan fiduciaries devote significant time and resources to educating participants about the importance of saving for retirement.
Despite this effort and the care that goes into making a well-balanced menu of investment options available to all participants, many participant allocations are at odds with their retirement needs.
In this article, we look at what fiduciaries can do to help participants allocate their investments to achieve better retirement outcomes.
Specifically, we believe plan sponsors should consider an investment re-enrollment, an action that requires little effort from participants and can improve their long-term prospects.
To support our view, we provide four case studies that demonstrate how plan sponsors have successfully re-enrolled participants to help improve their investment allocations.
— R. Bradford Huss, ERISA Attorney Director, Trucker Huss
While some sponsors may wonder how participants will respond, in our experience, they tend to appreciate the help.
The charts below demonstrate how re-enrollment for a hypothetical plan can help participants to become better allocated. In this example, participant allocations vary greatly before re-enrollment. During re-enrollment, however, most participants elected or defaulted into the QDIA.
Sponsors are committed to looking out for the best interests of participants. Re-enrollments are an expression of that commitment, since they can help participants positively improve their financial security in retirement.
For more information on how we can help you plan a successful re-enrollment, contact your American Funds representative or call us at (800) 421-9900.
— Toni Brown, CFA
— John Doyle
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing. Similar information about collective investment trusts can be obtained from Capital Group or participants’ plan provider or employer.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.