A growing numbers of plan sponsors have expressed openness
to embracing stable value funds as part of their retirement plans. For years,
fewer than half of defined contribution plans have offered stable value funds,
according to data from Prudential Retirement. Greater use of stable value in
the future is inevitable due to a number of factors, according to new research
from Prudential. First, plan sponsor and adviser attitudes toward broader use
of the asset class are favorable, Prudential notes. Among plan sponsors, 55% of
non-adopters plan to offer stable value in the future, while only 9% of
adopters say they’re considering getting rid of it.
For advisers and consultants, 30% of those who recommend
stable value funds to employer-clients are doing so more often today than they
did a year ago, and 35% expect this trend to accelerate over the next three
years, according to the paper. One factor that could spur greater interest in
stable-value funds is the evolving regulatory landscape for money market funds,
Prudential notes. Beginning this October, the SEC will allow money market funds
to impose redemption fees, or temporarily halt redemptions, when the funds fall
below certain liquidity thresholds.
Sixty-three percent of sponsors that currently offer money
market funds and 49% of consultants and advisers who currently recommend them
say the SEC ruling is likely to drive changes in their allocation to money
market funds, the study notes.
The changing retirement
More broadly, employers and retirement plan sponsors are
stepping back to take a more holistic look at retirement readiness in 2016. This
will be an important year for retirement plan sponsors and the retirement
income community, says William Charyk, president of The Institutional
Retirement Income Council. The need for plan sponsors to help workers address
their financial and retirement challenges has never been greater. We expect
plan sponsors to broaden their wellness programs to include financial wellness
initiatives and also take a closer look at ways to provide secure retirement
income to participants.
The year 2015 saw the definition of wellness broaden to
incorporate more than physical health and IRIC predicts employers will continue
to embrace that thinking. And while the retirement readiness conversation has
exploded in recent years, it is equally important to focus on how employees
will draw down their nest eggs to ensure they have sufficient ongoing assets
for a comfortable retirement. Incorporating Social Security planning and
education on in-plan and out-of-plan products and features into financial
wellness programs will become more common, the IRIC predicts.
Click here to access the full
article on Employee Benefit News.