J.P. Morgan Survey Shows Benefits of Plan Sponsors Taking Proactive Approach to DC Plan Design

NEW YORK, July 10, 2019 /PRNewswire/ -- J.P. Morgan Asset Management today released its fourth biennial survey of U.S. defined contribution (DC) plan sponsors, delivering insights into the actions of plan sponsors in positioning participants for retirement success.

The resulting white paper, titled "The Power of Being Proactive," reveals that while DC plan sponsors continue to feel a growing sense of responsibility for participants' financial wellness, many continue to take a hands-off approach to plan design and are falling short in achieving their goals.

"While it is certainly encouraging to see that more plan sponsors are taking responsibility for the financial wellness of plan participants, we still see a sizeable gap between the importance plan sponsors place on their goals and how successful they believe their plans are in achieving them," said Catherine Peterson, Managing Director, Global Head of Insights Programs at J.P. Morgan Asset Management. "The survey demonstrates the benefits of plan sponsors taking a proactive approach through measures such as automatic enrollment, automatic contribution escalation and streamlining investment decisions."

Results from the 2019 Retirement Insights survey of 838 plan sponsors reveals five key themes:

1.  A Disconnect Between Plan Sponsor Intentions and Effectiveness

• Almost three out of four plan sponsors (74%) now indicate they have a "very" or "somewhat" high commitment to employees' fiscal health - a 25% increase from 2013.
• There is often a sizable gap, however, between the importance plan sponsors place on their goals and how successful they believe their plans are in achieving them - notably fewer consider their plans "extremely" or "very" successful.

2.  A Clear Link Between a Proactive Philosophy and Success

• In this year's survey, 59% of plan sponsors say they focus on participants making their own choices, while 41% believe in proactively placing participants on a strong saving and investment path.
• Plan sponsors who follow a proactive philosophy find their plans to be more effective in achieving their goals - approximately 70% of proactive-philosophy plan sponsors believe their plans are "extremely" or "very" effective in helping to ensure participants achieve a financially secure retirement and are able to retire at their targeted ages— more than 50% higher than hands-off-philosophy plans (see accompanying chart).
• Generally speaking, proactive-philosophy plan sponsors are more likely to utilize industry best practices in terms of getting participants into the plan, helping them to contribute more and targeting communication efforts.

3.  Adoption of Automatic Features Continues to Rise, Although Misconceptions Remain

• This year's research shows that 55% of plan sponsors now offer automatic enrollment, up 28% from our first survey in 2013.
• Fewer plan sponsors—38%—offer automatic contribution escalation, though this represents an 81% increase from the 21% of plan sponsors offering this type of plan feature in 2013.
• Plan sponsors cited employee pushback and individual financial responsibility as key reasons not to offer automatic features, however J.P. Morgan's 2018 DC Participant Survey showed that most participants are in fact in favor or at least neutral about these features.

4.  TDFs remain popular with plan sponsors, but knowledge still lags

• This year, 62% of plan sponsors indicated their plans offer TDF series—notably higher than in 2013 when only 46% did.
• Three out of four plan sponsors (75%) are highly confident regarding their TDF selection and monitoring process.
• However, more than 30% of plan sponsors still do not have a solid understanding of the specifics used in their TDF designs.

5.  Plan sponsors are satisfied with advisors and consultants

• Most plan sponsors—71%—use advisors/consultants, and 67% are satisfied with their relationships. However, fewer than one in four (24%) express extreme satisfaction.
• Plan sponsors who work with advisors/consultants that proactively suggest new ideas and best practices are more likely to be extremely satisfied with the relationship—41% versus 17% of plan sponsors with advisors/consultants who do not offer these types of services.

Key Implications for Plan Sponsors

• Taking a more proactive approach appears to offer a strong win-win for both participants and plan sponsors.
• When automatic enrollment and automatic contribution escalation are used together, these programs can be powerful in driving positive plan results- increasing participation rates and usually overall satisfaction levels.
• There is room for continuing education on the importance of clearly understanding and effectively evaluating the TDF strategies plan sponsors select for their plans, especially when used as a QDIA.
• There is opportunity for advisors/consultants who consistently bring new insights to the table. Taking a more proactive approach can add meaningful value to their client relationships and potentially tap into new ways to expand their businesses.

"Our survey suggests that some DC plan sponsors have misconceptions about the concerns of their participants and are failing to take a proactive approach to plan design, with success suffering as a result," said Meghan Jacobson, CFA, Executive Director, J.P. Morgan Asset Management. "It has been demonstrated that features such automatic enrollment and automatic contribution escalation can have a significant positive impact on participation rates and savings levels, and working with advisors and consultants, plan sponsors may wish to consider the best way to take advantage of these features."

"Significant progress has been made to strengthen DC plans, with plan sponsors showing a strong and growing commitment to their employees' fiscal health," concluded Ms. Peterson. "However, the fact that many plan sponsors are still falling short of achieving their goals suggests that more needs to be done to adopt a proactive approach to plan design, in order to position participants for greater retirement funding success."

Methodology 

To stay in tune with the goals, motivations and progress of employers as they continue to shape the evolution of their defined contribution plans, J.P. Morgan Asset Management undertook its fourth plan sponsor survey on this topic.

From January through March, 2019, the firm partnered with Mathew Greenwald & Associates, a market research firm based in Washington, D.C., to conduct an online survey of 838 plan sponsors.

All respondents are key decision-makers for their organizations' DC plans. All companies represented have been in business for at least three years, offer a 401(k) or 403(b) plan to their domestic U.S. employees and have at least 10 full-time employees.

Below are breakdowns of our sample of plan sponsors, both by plan assets and by organizational role. Results aggregated across plan size categories were weighted to reflect the size distribution of plans in the U.S. DC plan universe.

About J.P. Morgan Asset Management

J.P. Morgan Asset Management, with assets under management of $1.7 trillion (as of March 31, 2019), is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. (NYSE: JPM), and its affiliates worldwide.

Any forecasts, opinions, statements of financial market trends or investment techniques and strategies expressed are those of J.P. Morgan Asset Management, unless otherwise stated, as of the date of the release. They are considered to be reliable at the time of this release, and may be subject to change without notice. Investing in Alternatives investments involves risks.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated, J.P. Morgan Alternative Asset Management, Inc., and J.P. Morgan Asset Management (Canada), Inc.

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SOURCE J.P. Morgan Asset Management