Updated with correction: Roughly 7% of plan sponsors offer a retirement tier and 9% are considering implementing one, according to a Cerulli survey.
In December 2020, as the world grappled with the pandemic, the ABA Retirement Funds program — a retirement plan used by some 4,100 law firms and organizations connected with the practice of law — rolled out an investment tier designed specifically for retirees and those nearing retirement.
The new retirement tier was made up of four retiree-focused funds that Scarlett Ungurean, the Chicago-based executive director at ABA Retirement Funds, described as "objective-based."
The tier included a capital-preservation fund, an inflation-protection fund and a diversified growth fund, which Ms. Ungurean said were "clones" of what was available in the core investment menu, as well as an income-focused fund, which was new.
Adding the tier to the $5.5 billion plan would encourage participants to keep their assets in the plan upon retirement and give them a much better deal on fees than if they were to move their money into an individual retirement account, Ms. Ungurean said.
"We thought we'd be taking care of our participants," she said, explaining that more than 1 in 3 participants are over age 50.
The new tier was marketed to the over-50 set as part of a "retiree toolkit," which included a Social Security optimization tool and a retirement planning guide. The tier does not yet offer annuities or other guaranteed income investments.
"That's retiree menu 2.0," Ms. Ungurean said, referring to the future possible addition of annuities.
Ms. Ungurean declined to disclose how much was in the tier, saying only that assets grew 25% from 2021 to 2022 with the number of participants jumping 72% during that time period.
The ABA Retirement Funds is among the relatively few plan sponsors that offer and market a retirement tier to plan participants over 50 but experts say that more plan sponsors are expected to make similar tiers available as baby boomers continue to retire in massive waves and increasingly rely on their workplace retirement plans as their primary source of retirement income.