Do you think the current 401(k) system is working? Do you think more data and analysis is necessary to inform plan sponsors in the effective design and management of their 401(k)s?

If you’ve ever asked yourself these questions, you’ll be interested to learn that the Defined Contribution Institutional Investment Association (DCIIA) has undertaken a project to study the 401(k) industry to address questions like these.

The DCIIA has conducted a lot of good research over the past few years on how 401(k) plans contribute to the retirement readiness of Americans. The genesis for their new project appears to be the conflicting reports surfacing on Americans’ retirement income adequacy and the role 401(k)s play. DCIIA indicates that the project is “designed to be an unbiased, fact-based assessment approach to validate or dispel assertions about defined contribution (DC) plans.”

Ultimately, DCIIA’s goal is to provide data, analyses and information for plan sponsors to help them create better designed plans. The results will be useful for policy makers and industry participants in striving to improve Americans’ preparedness for retirement.

DCIIA describes this project and some early findings in its July 2017 white paper, “Design Matters: The Influence of DC Plan Design on Retirement Outcomes.”

Three early findings identified were:

  1. The 80/80 Rule. “Automatic plan features work.” Retirement outcomes can be dramatically improved with automatic plan features like auto enrollment and auto escalation.
  2. “The current DC system can do better, even without additional legislative or regulatory action.” Greater adoption of available plan tools and features can drive better outcomes.
  3. “Limiting asset ‘leakage’ works.” Limiting plan cash-outs, loans and hardship withdrawals can increase projected savings levels.

As specialists in DC plans, these findings are not a surprise. We have discussions with many of our clients on matters like these to help them sponsor and manage well-designed, effective plans.

SLD is a proponent of striving to improve the retirement readiness of Americans, and we look forward to following the results of this project and sharing them with you in the future.