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White papers

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Have Target-Date Funds Failed? Are Income Guarantees the Answer?
Firm: AllianceBernstein Defined Contribution Investments
Author: Thomas J. Fontaine
Overview: Market turmoil led to disappointing target-date fund returns in 2008, triggering scrutiny of their design and management. Some have even questioned whether target-date funds are appropriate default investments for defined contribution plans.

We regard this as an opportunity for the major influencers—plan sponsors, consultants, regulators and the media—to step back and reflect on what the appropriate goals are for defined contribution plans in general and target-date funds in particular.

DC Focus: Summer 2011
Firm: BlackRock
Overview: Defined Contribution News and Trends from BlackRock. This issue includes: Are Loyal Employees Being Overlooked? New hires benefit while the most tenured miss out on best practices; Peer Review: The case for benchmarking; Five Degrees of Customization: Learn how simple changes can improve participant outcomes; and You Say You Want An Evolution...Participants and plan sponsors speak out in our annual survey.

BlackRock Annual Defined Contribution Plan Survey
Firm: BlackRock
Overview: Key Findings Summary of BlackRock's third annual defined contribution plan survey. BlackRock's DC survey, expanded to include plan sponsors for the first time, finds that both participants and plan sponsors give high marks to current DC plans for building savings and that participants are receptive to even more support. More challenging, the survey recognizes an opportunity for plan sponsors to address growing participant concern over the challenges of managing retirement spending.

Find the Right Fit: A framework for evaluating target date funds
Firm: BlackRock
Authors: Chip Castille and Laraine McKinnon
Overview: The financial crisis of late 2008 did widespread damage to numerous retirement portfolios, including many target-date funds that were at or near their target date. This was particularly depressing for participants who assumed that because their funds were designed to become more conservative as they approached their target date, they would be protected against a broad market decline.

Automatic Lifetime Income As A Path to Retirement Income Security
Firm: MetLife
Author: Jeffrey R. Brown, Ph.D., University of Illinois, Prepared for the American Council of Life Insurers
Overview: This paper proposes that policy makers encourage "automatic annuitization" so that is becomes an integral part of defined contribution plan design in the U.S. A large body of research in economics indicates that life annuities are the most cost-effective way to provide guaranteed income that will last for as long as individual lives and that, as a result, annuities ought to play a central role in the portfolio of most retirees. Unfortunately, for a variety of historical, regulatory and behavioral reasons, most participants in defined contribution plans (such as 401(k) and 403(b) plans) do not currently have access to guaranteed income options through their employer's plan. An emerging body of evidence suggests that making life annuities the "default" payout option from defined contribution retirement plans may be an effective way to increase annuitization rates and therefore an effective way to boost retirement income security of future retirees. The paper discusses a general outline for how such an automatic annuitization program could be implemented so as to increase participant choice, encourage annuitization for the majority of households for whom annuities would enchance retirement security, and limit the administrative burden on plan sponsors.

Best-Case Strategies for a Flexible Retirement
Firm: Metife
Overview: This study, produced by the MetLife Mature Market Institute in conjunction with the Scripps Gerontology Center, Miami University, examines retirement-related thinking, experiences and behaviors in the face of the unexpected, combining two methods: 50 in-depth interviews with individuals and couples (approximately half recently retired and half nearing retirement) and a national survey of 1,007 individuals ages 50 to 70 (both retired and pre-retired). Both the personal stories and the survey data reveal important insights into risks associated with retirement and the components of successful preparation for retirement.

Remodeling the Benefits and Retirement Income Space
Firm: MetLife
Overview: This abstract from the 9th annual Study of Employee Benefits Trends takes a close look at retirement and income protection benefits in the post-recession economy. It reveals employees worried about meeting their day-to-day financial expenses and concerned about their prospects for a secure retirement. Meanwhile employers, under continuing pressures to contain their benefit costs, are reassessing how they can help.