Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • 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
March 17, 2023 04:28 PM

Plan sponsors, managers mull merits of SECURE 2.0 provisions

Margarida Correia
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    DC_East_2023_i.jpg

    Questions around the nearly 100 provisions in the SECURE 2.0 Act and whether and which ones to implement in retirement plans dominated discussions at Pensions & Investments' Defined Contribution East conference held March 12 – 14 in Orlando.

    During panel discussions and networking breaks, plan sponsors debated the merits and complexities of implementing voluntary measures such as emergency savings accounts and employer matching contributions for student loan debt payments.

    Many puzzled through questions not addressed in the legislation and for which they would like additional guidance from the Department of Labor.

    A big question for many plan sponsors is how to prevent abuses in emergency savings accounts linked to retirement plans, said Holly Verdeyen, a partner and U.S. defined contribution leader at Mercer, during a well-attended panel called "Accomplishing So Much in So Little Time — Meeting the New SECURE 2.0 Provision Deadlines."

    Plan sponsors want to know how to "prevent things like participants contributing to their accounts and getting the match and then immediately withdrawing their contribution," she said.

    Another big question for many plan sponsors revolves around the optional provision of allowing employees to designate employer matching contributions on a Roth basis.

    "There is so much additional clarification that is needed on how those employer matching contributions are going to be treated for the purposes of payroll, withholding and income taxation," Ms. Verdeyen said.

    "This is one of the few provisions that is actually implementable today, but I think employers would take on a lot of risk implementing that provision without that additional clarification that really needs to come from the IRS," she said.

    Even as plan sponsors and their service providers tried to dissect the legislation and scratched their heads about how best to move forward, some were already thinking ahead to SECURE 3.0.

    Shlomo Benartzi, professor emeritus at UCLA Anderson School of Management and founder and CEO of PensionPlus, a digital retirement income service provider, looked at how to boost financial wellness in a way that he felt "really moves the needle."

    "That's not to say that SECURE 2.0 is not a great improvement, but I think there's a lot more we can do," he said during a keynote speech on "SECURE 3.0 and Behavioral Economics — Making the Best Nudge Even Better."

    Mr. Benartzi suggested that the auto-enrollment and auto-escalation requirements for all new plans under SECURE 2.0 be more aggressive. SECURE 2.0 requires employers offering new 401(k) and 403(b) plans to auto-enroll participants at an initial deferral rate of 3% and then auto-escalate them by 1% annually.

    "We need to start at higher rates, we need to escalate sooner and faster," Mr. Benartzi said.

    Mr. Benartzi also pushed the industry to use data to personalize the default auto-enrollment and auto-escalation rates in defined contribution plans.

    "How many of you believe that a single mom with three kids and five maxed out credit cards should be auto-enrolled at 7%?" he challenged the audience during his keynote speech.

    Mr. Benartzi pointed out that auto-enrolling everyone at the same rate without considering their debt is misguided.

    "I think we have to start looking at data. We have to start using it. We have to start personalizing it," he said.

    Focus on personalization

    The concept of personalization permeated many other panel discussions. Joseph Szalay, senior vice president of defined contribution at PIMCO, for example, talked about personalized target-date funds, those that in addition to a participant's age incorporate data such as a participant's current annual salary and current retirement account balance.

    "Instead of just giving you the 2050 or 2030 rendition of yourself, we're able to blend those target dates and give someone a specific allocation for them that's going to automatically update throughout their life," Mr. Szalay said during a panel discussion called "DC Lineup Construction: The Growing Appeal for Simplicity, Lower-Cost Investments and More Personalization."

    Rachel Weker, vice president and senior retirement strategist at T. Rowe Price Group, also discussed the importance of using data to personalize and make decisions about defined contribution plan design.

    "As we recognize the unique needs of different populations, we understand the value of being able to drill down and look at differences by gender, by race and ethnicity, maybe by household income," she said during a panel called "Analyzing Your Plan's Data to Make More Informed Decisions."

    Guaranteed income the norm?

    Another popular topic revolved around guaranteed retirement income and whether SECURE 2.0 would spur greater adoption of annuity products within defined contribution plans.

    John Doyle, senior vice president and senior retirement strategist for Capital Group's American Funds, predicted that guaranteed income will become the norm within 10 years during a panel called "Continuing the Discussion — How Does Your Plan Provide Guaranteed Income to Retirees?"

    "It's a process and there are decisions that need to be made," Mr. Doyle said of the many steps that plan sponsors need to take before implementing a guaranteed income product into their retirement plans.

    Patrick Goessling, sales director of institutional income annuities at MetLife who was also on that panel, noted that "conversations are happening" and was encouraged by the fact that SECURE 2.0 made annuities easier to understand.

    Under SECURE 1.0, plan sponsors and participants "had to do a little math," Mr. Goessling said.

    The prior legislation limited the maximum purchase amount for a qualified longevity annuity contract to the lesser of 25% of a participant's account balance or $145,000. SECURE 2.0 made it more straightforward by eliminating the 25% threshold and increasing the maximum QLAC purchase amount to $200,000.

    "Much, much more simple and easier to understand for all parties involved," Mr. Goessling said of the change.

    Both Messrs. Goessling and Doyle agreed that making annuities simple will be critical to boosting their adoption in plans, with Mr. Doyle adding that participant education will be important too.

    Depending on how the question is phrased, "80% of participants want guaranteed income but none of them want annuities, and obviously you're talking about the same thing," Mr. Doyle said.

    Heated ESG discussions

    The sizzling hot topic of ESG investing also stirred up heated discussions. During a panel called "The Wait is Over — DC Plans Now Have More Discretion to Embrace ESG," speakers vented about the politicization of the Department of Labor's final "ESG rule," which allows retirement plan fiduciaries to consider ESG factors when selecting investments.

    "It's a neutral rule. It's not an ESG rule," said Liana Magner, executive vice president and head of retirement and institutional at Natixis Investment Managers. "It's a rule about prudently selecting and monitoring investment options over time."

    Ms. Magner echoed earlier comments that day from Ali Khawar, principal deputy assistant secretary of the Labor Department's Employee Benefits Security Administration, who bemoaned the misinformation about what the final rule actually does.

    "It does not mandate the consideration of ESG, it does not mandate that everyone has to buy Amazon rainforest property," Mr. Khawar said of the final rule. "What it does is say that you have to be a prudent fiduciary."

    Ms. Magner and the other panelists urged plan sponsors not to be dissuaded by the current backlash to ESG investing.

    "Forget about this nonsense coming out of Washington, D.C., around what you can and can't do," said Jeff Vilker, director of defined contribution for Impax Asset Management. "It's just ridiculous. It's infuriating because it's impacting our ability as a community to close the retirement gap."

    Brian Croce contributed reporting.

    Related Article
    DOL's priorities include SECURE 2.0, ESG rule, EBSA head says
    Some employers not contributing to DC plans despite tight labor market – Vanguard
    SECURE 2.0 to increase catch-up contributions, raise RMD age
    Recommended for You
    ONLINE_190309866_AR_-1_ESPMRMAAWVSS.jpg
    OneDigital, others look to snap up regional banks' 401(k) businesses
    A handful of $100 bills
    State-run retirement savings programs may fuel launch of private plans, Pew study says
    Diego Martinez
    Rich matches boost employees' savings, support recruiting
    EDHEC Climate and Finance Special
    Sponsored Content: EDHEC Climate and Finance Special

    Reader Poll

    April 26, 2023
     
    SEE MORE POLLS >
    Sponsored
    White Papers
    2023 Global Climate Survey - Are investors moving from aspiration to implementa…
    The Value of Value is Still Compelling
    Valuing Banks: Hidden Losses Versus Assets
    Research for Institutional Money Management
    Targeting Impact with Indexes
    Global Fixed Income: Volatility and Uncertainty Here to Stay
    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
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • 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