Retirement Marketplace to be Driven

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<p><strong>Boston &mdash; Aug. 2&nbsp;</strong><br />A study of advisers whose business is largely focused on the retirement marketplace reveals that auto-enrollment (allowing employers to automatically enroll workers in the retirement plan and requiring participants to specifically opt out if they prefer not to participate) and auto-escalation (which allows employees to automatically increase their annual plan contributions) are the two principal features most likely to shape the retirement marketplace over the next three years. <br /><br />The poll, prepared in conjunction with Putnam&#39;s annual 401(k) Golden Scale meeting, also found that although 75 percent of the advisers&#39; plan sponsor clients will add an auto-enrollment feature within the next two years, two of every five sponsors are resisting its use over concerns about added matching contribution and profit-sharing costs driven by an anticipated uptick in enrollment.<br /><br />&quot;Our 401(k) advisers strongly agree that auto features wil&nbsp; be one of the dominant drivers of increased retirement savings, but the hurdle of perceived added program costs means that many plan sponsors will not provide these features to their employees,&quot; said David Tyrie, Putnam Investments managing director and director of retirement services. &quot;What&#39;s clear too from our poll is that the role of the adviser is critically important long after the plan has been implemented, since plan sponsors continue to be reliant on their advisers for assistance and insight related to numerous operational and administrative plan issues.&quot;<br /><br />Other key findings include:</p><ul><li>Advisers are recommending an array of default options <strong>&mdash; </strong>80 percent of advisers recommend target-date funds, 65 percent target risk funds and 63 percent favor balanced mutual funds. Only 13 percent are waiting for final Department of Labor guidance.</li><li>Open architecture within bundled plans is a critical must-have.</li><li>Fifty percent of advisers serve as fiduciaries to the plans they manage.</li><li>Sixty percent of advisers say their clients have sufficient information related to plan fees, but they still rely on advisers for help.</li><li>The Pension Protection Act and growth of the defined contribution marketplace are viewed as business-expansion opportunity by advisers.<br /></li></ul><p>Tyrie said the Pension Protection Act and growing complexity of 401(k) plans means sponsors are increasingly turning to their advisers to interpret retirement plan legislation and the new default options recommended by the Department of Labor.</p>

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