Sponsors of defined contribution plans will assume more of a management role in 401(k) plans, as plan participants increasingly cede control of their investment decisions, speakers at a Pensions & Investments conference said.
A more active or paternal role for plan sponsors was a common theme mentioned both openly and privately at P&Is 11th Annual West Coast Defined Contribution conference in San Francisco Oct. 19-21.
Employees already are overburdened in addressing more immediate issues such as paying monthly mortgage bills and worrying about current employment and other non-retirement issues, the speakers said. The idea of making decisions about retirement, deemed far away, is simply off their radar or something they dont want to make on their own.
People are afraid to make those (retirement) decisions and want someone else to validate them for them, said Michelle Berklacich, administrator at Californias Department of Personnel $6 billion defined contribution plan in Sacramento.
We offer plan participants a lot of ways to get investment guidance, but people really want someone to sit down with them and say they are doing the right thing.
Darrell Spence, vice president and economist at Capital Strategy Research in Los Angeles, one of the keynote speakers, said the current economic turmoil would lead to 401(k) plan sponsors having to increase employee hand-holding and simplify investment options.
Automatic enrollment and automatic increases in deferrals, as well as fewer investment options, help place investment decisions on automatic pilot or into the hands of more skilled professionals and out of the employees control, said Stuart ODell, director of retirement investments at Intel Corp., Santa Clara, Calif.
Weve had to simplify our investment options from 30 down to 17 choices, as we found too many choices had people paralyzed, Ms. Berklacich said.