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By Staff Report
Oct. 10, 2006
Event: Pensions & Investments’ Seventh Annual West Coast Defined Contribution Conference
Date: October 8-10, 2006, the Fairmont Hotel, San Francisco
What: Pensions & Investments’ Defined Contribution Conferences allow investment providers, employers and consultants to get together and discuss the big issues and trends affecting the industry. With the recent pension reform—and more than 400 attendees, the biggest turnout ever—there was a lot for everyone to learn and discuss.
Conference info: For more information, go to www.pionline.com.
Day 2—Tuesday, October 10
Theme of the conference: Many speakers throughout the show talked about how the conversation around getting employees prepared for retirement has changed over the years. In a panel discussion about the use of managed accounts in 401(k) plans, Christopher Jones, chief investment officer at Financial Engines, says that at past conferences, speakers focused more on how to get employees engaged.
“Today the conversation is shifting away from 401(k) plan sponsors requiring individual responsibility of participants,” he says. While employers still give 401(k) participants the opportunity to be responsible for their retirement savings, they also are more focused on designing 401(k) plans that will take care of it for them.
In a separate panel discussion, Dena Regan, global benefits manager at Santa Rosa, California-based JDSU, discussed the difficult position many employers are in when trying to communicate to employees about the importance of saving for retirement.
“Yes, we know that we have 25-year-olds who are 100 percent invested in stable value,” she says, noting that with such conservative investments it’s unlikely that these employees will have enough saved for retirement. “But who am I to say to someone, ‘Yes, I understand you are living paycheck to paycheck, but you really need to save for retirement.’ “
Dearth of data: One of the key challenges facing managed account providers is getting data from the participants, admitted Kevin Crain, director of integrated product management at Merrill Lynch Retirement Group, speaking on a panel about the role of managed accounts in 401(k) plans. When employees are automatically enrolled into a managed account, this can pose a greater challenge for the providers, according to the panelists.
Merrill Lynch addresses the problem by using the Web and paper-based statements to show investors their personalized portfolios, Crain says. “That personalized statement usually draws people in,” he says.
Similarly, Financial Engines collects information from the 401(k) plan’s record keeper and uses that to customize a portfolio. The company will e-mail the participant with information about the portfolio. When employees see the information that Financial Engines has about them, they will usually speak up about their spouse’s assets or other assets they have outside the plan, Jones says.
Risk, not merely returns: Employers shouldn’t just look at investment returns when they are choosing an investment provider for their 401(k) plans. That was the piece of advice that Ed Haldeman, president and CEO of Putnam Investments, told attendees in his keynote address Tuesday morning. “Plan sponsors need to focus on risk efficiency and not just on high returns,” he says. He noted that finding investment options with strong returns is just one challenge that plan sponsors face.
But finding investment options with a suitable amount of risk also should be a goal for companies, Haldeman says. Just like defined-benefit plan sponsors maintain a strong focus on risk, defined-contribution plan sponsors must think the same way, he says.
“From an investment management perspective, the switch from defined benefit to defined contribution simply means a change in plan structure,” he says.
Bad analogy: In what may not have been the best analogy to make—given that almost everyone in the room was about to board a plane to return home—Kelli Hueler, president and founder of Hueler Cos., compared individuals saving for retirement to planes flying and taking off.
While most people are concerned that there will be a fatal accident during departure, that’s rare because all the engines are up and running, leaving little room for error. In fact, it’s the landing that tends to be the problem, she says, noting that 46 percent of fatal accidents on planes occur at landing. Similarly, it’s usually when employees retire from their companies that they are left on their own, and many find that they don’t know how to manage their savings so that they have enough to live on for retirement.
—Jessica Marquez
– Jessica Marquez
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