Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • Consultants
    • 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
    • Influential Women in Institutional Investing 2023
    • 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
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
    • 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
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
February 04, 2019 12:00 AM

Older companies, not upstarts, will take lead on innovative changes

Robert Steyer
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Angie Gaylor
    Toni Brown believes older companies with established DB plans are more likely to 'make a leap of faith' in using innovative concepts for their DC plans.

    The future of defined contribution may be well rooted in the past.

    Although high-growth companies are rapidly adding workers and DC retirement assets, some DC industry experts say older companies and some mature industries may lead the charge to greater advances in the future.

    "The leaders of the next generation are older, established legacy plans that have older employees," said Toni Brown, a San Francisco-based senior defined contribution strategist at American Funds, part of Capital Group Cos., referring to employers that offer defined benefit and defined contribution plans.

    Companies with DB and DC plans "tend to pay more attention to employees' retirement needs," said Robyn Credico, the Arlington, Va.-based defined contribution consulting leader for Willis Towers Watson PLC. For some companies with only a DC plan, "DC is more of an attraction tool than a retirement tool."

    The challenge for companies with DB and DC plans is: "How do I replicate my DB philosophy in a DC plan?" she said. These challenges vary among sponsors depending on workforce demographics, she added.

    Ms. Credico and Ms. Brown said a big challenge to sponsors — whether they offer both plans or solely a DC plan — is convincing employees to keep their money in the DC plan when they retire.

    They acknowledge the dynamics of baby boomers retiring and taking their accounts out of their plans. Even though younger people are being hired, their salaries, DC contributions and account balances don't match those of retirees.

    Ms. Brown predicted this inflow-outflow imbalance will last another five to 10 years. "Then, there will be more DC growth because the money from younger employees will be significant."

    Ms. Brown said companies with both DB and DC plans may have an advantage in improving DC plans.

    "They think of it as a benefit, so it's easier for them to make a leap to faith," she said. "It's a little bit easier when you have a DB plan in place to establish a DC plan."

    Of course, DC-only companies "can create a successful DC plan" for the future because "as companies age and employees age, they have a better understanding of retirement."

    The legacy companies, Ms. Brown added, "appear to be more proactive" in establishing what she calls a retirement tier in their investment lineups to address the needs of older and longer-tenured employees with larger balances.

    The retirement tier can include choices among a target-date fund, a collection of target-risk funds that become more conservative over time, stable value, fixed-income securities and/or an annuity-bidding platform that enables participants to choose out-of-plan annuities.

    Ms. Brown cited the health-care industry as one that has "moved more quickly" to improve DC plans. "Their workforce cares for other people," she said. "They have a wide range of salaries and knowledge. Many employees are 55 and older."

    Lori Lucas, president and CEO of the Employee Benefit Research Institute, Washington, cited health-care companies and hospital companies as making efforts to improve DC plans in part by encouraging retirees and/or former employees to keep assets in their DC plans.

    "Health-care companies see it as a mission to care for their employees," partly as a reflection of their goals and also long tenures of many health-care workers, she said.

    Ms. Lucas added that a series of focus groups conducted by EBRI in the summer among Silicon Valley companies yielded surprising results. "Even the high-tech companies were viewing their role as more paternalistic than I would have thought."

    DC plan innovation won't be limited to a specific industry or retirement plan approach, said Lew Minsky, president and CEO of the Defined Contribution Institutional Investment Association in Washington.

    "It depends on the workforce mix and internal corporate culture," he said. "The variables are too great to predict which group of employers will accelerate the pace of change."

    Mr. Minsky added that large sponsors "might be leaders in investment outsourcing. Employers are looking ways to "move away from owning the fiduciary responsibility of investment choices," he said. "They have the most to gain from figuring out the fiduciary puzzle."

    Related Articles
    Largest funds top $11 trillion; assets up 6.4%
    Private equity, real assets make gains with funds wanting safety
    Fixed income still prized in asset mix of corporate funds
    Largest funds top $11 trillion; assets up 6.4%
    For largest U.S. fund, the sky's the limit
    Private equity, real assets make gains with funds wanting safety
    Recommended for You
    Pedestrians_Business_i.jpg
    Workers' expectations about choosing when to retire unrealistic – study
    Calculator
    U.K. defined contribution sponsors resist ESG, private markets over fees
    401k_Jar_i.jpg
    Younger workers more likely to take 401(k) plan loans as their balances grow – study
    AI in Investment Management: Separating Hype from Reality
    Sponsored Content: AI in Investment Management: Separating Hype from Reality
    Sponsored
    White Papers
    2023 Hot Topics in Retirement and Financial Wellbeing
    Bonds: Shaken, but Not Stirred
    A Study of Allocations to Alternative Investments by Institutions and Financial…
    Unlocking Hidden Value in Japan
    The Art of the Possible in Data Automation for Institutional Investors
    Parnassus View - Investing in AI: Transformative New Tech, Same Old Rules
    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 Custom Content
    • 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
      • Artificial Intelligence
      • Consultants
      • 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
      • Influential Women in Institutional Investing 2023
      • 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
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
      • 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