WINDS of CHANGE for DC Plans

An atmosphere of change is brewing for defined contribution plans, particularly in U.S. legislative and regulatory circles. Three key issues are at the leading edge of these changes.


Shortfall in Worker Participation

Expect continued legislation aimed at stronger plan participation and broader access for workers not currently covered by plans.

68 million

Workers not covered by workplace plans, in a working population of 148 million Americans.1

Opportunity Increase Coverage

See changes brewing
Increase savings

Typical allocation of pay used as default for most auto-enrollment features in 401(k) plans.2

Opportunity Increase Savings

See changes brewing
Retain savings

The chance of a worker achieving 80% replacement income is reduced by this margin, due to job changes, premature cash-outs, and penalties.3

Opportunity Retain Savings

See changes brewing
Our Forecast

Partly sunny

Forecast blue

Enhanced Participation

Expect modest steps toward a new fundamental structure for providing retirement benefits to employees through non-employer sponsored plans.

Extended Forecast

Plan sponsors may find the new structures more attractive than what is currently available. Workers who lack a retirement plan will have greater access to one. Momentum is encouraging.


Inefficiency In Investments

Confusing array of investment options and a lack of fee transparency can make it difficult for workers to achieve retirement goals.

20 rain

Average number of total investment options in 401(k) plans.4

Opportunity Improve Fund Menus

See changes brewing
22 percent

Proportion of DC plans’ asset under management made up of target date products.5

Opportunity Improve Asset Allocation

See changes brewing
46 percent

Surveyed employees (ages 50-68) who believe they are not paying any fees for their retirement plan offerings. (Average fees are 1.5%.)6

Opportunity Better Fee Structures

See changes brewing
Our Forecast

Partly cloudy — chance of thunderstorms

Forecast gray

Improved Investment Efficiencies

Watch for mixed conditions. Expect broad consensus in favor of simplified investment menus and defaults, but deeper debate on fee structures.

Extended Forecast

Plan sponsors will be wise to ensure reasonable fees while preserving the quality of investment options in their plans.


Retirement Income Needs

Longer lives, market turbulence and increased investment responsibilities are combining to create income uncertainties for future retirees.

44 percent

Fewer than half of today’s workers have calculated their income needs as part of planning for retirement.8

Opportunity Improve Income Awareness

See changes brewing
6 years

Average gain in life expectancy during past 20 years means people will need more income to sustain longer retirement.10

Opportunity Improve Access To Income Products

See changes brewing
Changing rules

Multiple agencies are lining up in support of expanding use of annuities in 401(k) plans.11

Opportunity Update Regulations

See changes brewing
Our Forecast

Cloudy with fog in low-lying areas

Forecast orange

Improved Income Focus

Watch for more participant education on retirement readiness. Widespread adoption of in-plan income solutions will come slowly due to limited consensus on solutions.

Extended Forecast

Participants will continue to seek out greater income security but must find better ways to manage both investment and longevity risks.

Copyright © Russell Investments 2017. All rights reserved.

1 “Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2013,” EBRI, October 2014. “The Employment Situation — March 2015,” Bureau of Labor Statistics, March 2015.
2 Source: “The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans,” BrightScope/ICI DC Plan Profile, December 2014.
3 Source: “The Impact of “Leakage” on 401(k) Accumulations,” EBRI, June 2014.
4 Source: “2014 Universe Benchmarks Measuring Employee Savings and Investing Behavior in Defined Contribution Plans,” AON, 2014.
5 Source: “TDFs in 401(k)s stymie diversification,” BenefitsPro, March 2015.
6 Source: “Nearly Half Of Americans Surveyed Falsely Think They Pay Zero Retirement Investment Fees,”, September 2014.
7 Source: “Finding, and Battling, Hidden Costs of 401(k) Plans,” New York Times, November 2014.
8 Source: “2014 RCS Fact Sheet #6 Preparing For Retirement In America,” Employee Benefit Research Institute and Greenwald & Associates, 2014.
9 Source: “Bipartisan Lifetime Income Disclosure Legislation Introduced in Senate,” American Benefits Council, May 2015.
10 “Global Life Expectancy Increases by About Six Years,” Wall Street Journal, December 2014.
11 Source: “Treasury Issues Guidance to Encourage Annuities,” U.S. Department of the Treasury, October 2014.


The information, analyses and opinions set forth herein are intended to serve as general information only and should not be relied upon by any individual or entity as advice or recommendations specific to that individual entity. Anyone using this material should consult with their own attorney, accountant, financial or tax adviser or consultants on whom they rely for investment advice specific to their own circumstances.

This material is not an offer, solicitation or recommendation to purchase any security.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.

This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.

First Use: May 2015

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