Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Canadian Pension Risk Strategies
    • 2023 Retirement Income
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
February 20, 2017 12:00 AM

401(k) plans are gradually picking up features of their DB brethren

Rob Kozlowski
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Vincent Ricardel
    J. Mark Iwry is a big proponent of options that can produce a lifetime income stream for retirees.

    As 401(k)s become the standard for private-sector workers, they are slowly adding defined benefit plan-like features.

    The most visible of those features include automatic enrollment and collective investments, which have gained traction in recent years in the form of target-date fund lineups.

    J. Mark Iwry, until Jan. 20 the senior adviser to the secretary of the Treasury and the Treasury Department's deputy assistant secretary for retirement and health policy, cited auto enrollment as one of three primary “cardinal virtues” he has championed.

    Companies have embraced that virtue. According to a recent Callan Associates survey, about 65% of defined contribution plans used auto enrollment in 2016, up from 61% in 2015 and 52.1% in 2012.

    “A second virtue of pension plans is that they've traditionally provided "pensions' — low-cost lifetime income,” Mr. Iwry said. “The defined benefit plan is in a sense an annuity factory: a low-cost way of providing lifetime income security. The ability to get lifetime guaranteed retirement income from a plan is extremely valuable but has been eroding. So we've been encouraging 401(k) plans to incorporate lifetime income by, for example, buying an annuity from an insurance company or otherwise providing long-term income that roughly approximates an annuity.”

    At the moment, however, plan sponsors are hesitant about lifetime income options because of concerns about fiduciary responsibility.

    A Government Accountability Office report in September noted that “fear of liability may deter plan sponsors from offering annuities” because the U.S. Department of Labor does not offer any kind of liability relief incentive for sponsors to offer them.

    Whether the DOL could offer this during a Donald Trump administration is an unknown, said Olivia Mitchell, professor of insurance and risk management at The Wharton School, University of Pennsylvania, Philadelphia, and executive director of the Pension Research Council.

    “Up until Jan. 20 it looked like we were well on that path. Regulations were being written,” Ms. Mitchell said. “There was a lot of support for it in the (Obama) administration. I just don't know if this will be derailed now that the current administration has so much on its plate.”

    Mr. Iwry's third “cardinal virtue” of defined benefit plans, he said, is professional collective investment of DC plan assets.

    “We've encouraged 401(k)s to move in this direction because collective, institutional investment delivers lower costs through bargaining power and economies of scale, while professional management brings investment know-how, discipline and regular rebalancing. Professionally designed default funds and investment menus are incremental steps in this direction; a larger step would remove individual self-direction of investments from employer contributions,” Mr. Iwry said.

    The recent Callan Associates survey showed that while 401(k) plans still use mutual funds, more are using collective investment trusts. Of the plans surveyed, 65.2% of plans offered CITs in 2016, up from 60% in 2014 and 48.3% in 2012. Mutual fund usage, meanwhile, dropped to 84.3% of plans in 2016 from 88.2% in 2014 and 92% in 2012.

    Related Articles
    Fees remain on top of DC plan executives' minds — Callan survey
    Don't lower caps on employee retirement savings
    Target-date funds continue their winning ways
    Public funds stay strong despite major challenges
    Credit easing, regulation put plans on critical list
    Public funds stay strong despite major challenges
    Credit easing, regulation put plans on critical list
    Colas Inc. picks J.P. Morgan for new midcap value option for 401(k) plan
    IMF expects transition to DC from DB to continue
    More than half of non-profits offer lifetime income option, survey finds
    Recommended for You
    403b_plan_1550-main_i.jpg
    House committee advances bill allowing 403(b) plans to offer CITs
    pi_202320522p29-levine_i.jpg
    DOL, trade groups clash over ERISA prohibited transactions
    Photo of ABA Retirement's Scarlett Ungurean
    Retirement tiers emerge from hiding in DC plans
    Global Macro as a Much-Needed Diversifier
    Sponsored Content: Global Macro as a Much-Needed Diversifier

    Reader Poll

    May 1, 2023
     
    SEE MORE POLLS >
    Sponsored
    White Papers
    Counting on a Crisis: A Catalyst for Investment Innovation?
    A Strategic Allocator's Guide to Productivity and Profits
    Biodiversity: why investors should care
    Quantifying sustainability – the numbers, the data, and the people
    Valuing Banks: Hidden Losses Versus Assets
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Canadian Pension Risk Strategies
      • 2023 Retirement Income