PLANSPONSOR - June/July 2020 - 8
UPFRONT
Shortfalls of DC Plan Design, Investing
IT HAS BECOME increasingly obvious,
as defined contribution (DC) plan participants
try to manage their savings for retirement,
that many are ill-equipped.
Typically, they are unfamiliar with
how to set up a portfolio to withstand
market losses, or how to react to such
losses when they occur, says Mike Swann,
a client portfolio manager at SEI.
" The answer for most plan participants
continues to be target-date funds [TDFs], "
helping them stay the course during challenging
times, says Ross Bremen, a partner
in NEPC's defined contribution practice.
However, the market drop caused by
the COVID-19 pandemic revealed a couple
of shortfalls in DC plan design. According
to Gregory Kasten, M.D., CFP, AIFA, and
founder and CEO of Unified Trust Co.,
" The lack of focus on downside
risk creates a meaningful and
significant impact on participants. "
a February study found that the average
near-retiree holds 78% of his portfolios in
stocks. " Most retirement experts would
probably say this is too much. Sequence
risk is bad when returns fall shortly before
or just as a participant retires, " he notes.
The pandemic has uncovered the fact
that DC plans do not effectively de-risk
those closest to retirement, he says.
These plans need structures-i.e., risk
constraints-that can keep risk manageable,
he adds and points to two strategies
United Trust employs. First, it reduces the
8 PLANSPONSOR.COM June - July 2020 Art by Wesley Allsbrook
participant's overall asset allocation to less
exposure to equities than in the average
TDF; second, it uses stable value funds in
managed accounts. Both reduce risk for
five to six years up to retirement.
" Most TDFs don't hold stable value
funds because they are not mutual funds,
but stable value is very helpful when, as in
the first quarter, the bond market was also
losing money. It has a smoothing effect on
fixed income, " Kasten says. He adds that
this highlights an issue with TDFs-they
consider only a participant's age and not
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PLANSPONSOR - June/July 2020
Table of Contents for the Digital Edition of PLANSPONSOR - June/July 2020
Revisiting Wellness
2020 Recordkeeping Survey
Blight Resistant
Debt Busters
A Time for Caution
PLANSPONSOR - June/July 2020 - Cover1
PLANSPONSOR - June/July 2020 - Cover2
PLANSPONSOR - June/July 2020 - 1
PLANSPONSOR - June/July 2020 - 2
PLANSPONSOR - June/July 2020 - 3
PLANSPONSOR - June/July 2020 - 4
PLANSPONSOR - June/July 2020 - 5
PLANSPONSOR - June/July 2020 - 6
PLANSPONSOR - June/July 2020 - 7
PLANSPONSOR - June/July 2020 - 8
PLANSPONSOR - June/July 2020 - 9
PLANSPONSOR - June/July 2020 - 10
PLANSPONSOR - June/July 2020 - 11
PLANSPONSOR - June/July 2020 - 12
PLANSPONSOR - June/July 2020 - 13
PLANSPONSOR - June/July 2020 - Revisiting Wellness
PLANSPONSOR - June/July 2020 - 15
PLANSPONSOR - June/July 2020 - 16
PLANSPONSOR - June/July 2020 - 17
PLANSPONSOR - June/July 2020 - 2020 Recordkeeping Survey
PLANSPONSOR - June/July 2020 - 19
PLANSPONSOR - June/July 2020 - 20
PLANSPONSOR - June/July 2020 - 21
PLANSPONSOR - June/July 2020 - 22
PLANSPONSOR - June/July 2020 - 23
PLANSPONSOR - June/July 2020 - 24
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PLANSPONSOR - June/July 2020 - 27
PLANSPONSOR - June/July 2020 - 28
PLANSPONSOR - June/July 2020 - 29
PLANSPONSOR - June/July 2020 - 30
PLANSPONSOR - June/July 2020 - 31
PLANSPONSOR - June/July 2020 - 32
PLANSPONSOR - June/July 2020 - 33
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PLANSPONSOR - June/July 2020 - 35
PLANSPONSOR - June/July 2020 - Blight Resistant
PLANSPONSOR - June/July 2020 - 37
PLANSPONSOR - June/July 2020 - Debt Busters
PLANSPONSOR - June/July 2020 - 39
PLANSPONSOR - June/July 2020 - A Time for Caution
PLANSPONSOR - June/July 2020 - 41
PLANSPONSOR - June/July 2020 - 42
PLANSPONSOR - June/July 2020 - 43
PLANSPONSOR - June/July 2020 - 44
PLANSPONSOR - June/July 2020 - 45
PLANSPONSOR - June/July 2020 - 46
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PLANSPONSOR - June/July 2020 - 48
PLANSPONSOR - June/July 2020 - Cover3
PLANSPONSOR - June/July 2020 - Cover4
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