scholarly journals Simplifying Choices in Defined Contribution Retirement Plan Design: A Case Study

2017 ◽  
Author(s):  
Donald B. Keim ◽  
Olivia S. Mitchell
Keyword(s):  
Defined Contribution ◽  
Retirement Plan ◽  
Plan Design

scholarly journals Simplifying choices in defined contribution retirement plan design: a case study

2017 ◽  
Vol 17 (3) ◽  
pp. 363-384 ◽  
Author(s):  
DONALD B. KEIM ◽  
OLIVIA S. MITCHELL
Keyword(s):  
Risk Factors ◽  
Administrative Data ◽  
Pension Fund ◽  
Large Firm ◽  
Defined Contribution ◽  
Turnover Rates ◽  
Retirement Plan ◽  
Systematic Risk Factors ◽  
Investment Choices

AbstractThe growth and popularity of defined contribution pensions, along with the government's increasing attention to retirement plan costs and investment choices provided, make it important to understand how people select their retirement plan investments. This paper shows how employees in a large firm altered their fund allocations when the employer streamlined its pension fund menu and deleted nearly half of the offered funds. Using administrative data, we examine the changes in plan participant investment choices that resulted from the streamlining and how these changes might affect participants’ eventual retirement wellbeing. We show that streamlined participants’ new allocations exhibited significantly lower within-fund turnover rates and expense ratios, and we estimate this could lead to aggregate savings for these participants over a 20-year period of $20.2 M, or in excess of $9,400 per participant. Moreover, after the reform, streamlined participants’ portfolios held significantly less equity and exhibited significantly lower risks by way of reduced exposures to most systematic risk factors, compared with their non-streamlined counterparts.

Automatic enrollment and job market turnover

2019 ◽  
pp. 1-11
Author(s):  
Angela A. Hung ◽  
Jill Luoto ◽  
Jeremy Burke ◽  
Stephen P. Utkus ◽  
Jean A. Young
Keyword(s):  
Labor Market ◽  
Employee Participation ◽  
Wealth Accumulation ◽  
Defined Contribution ◽  
Job Market ◽  
Design Features ◽  
Retirement Plan ◽  
Defined Contribution Plans ◽  
Plan Design ◽  
Retirement Wealth

AbstractAutomatic enrollment has substantially increased employee participation in defined contribution plans. Yet little is known about how retirement plan design features influence retirement wealth accumulation in a setting of labor market turnover. We find that employees separating from jobs with automatic enrollment plans are significantly more likely to take a cash distribution (and potentially pay a tax penalty) than those separating from jobs with voluntary enrollment plans, offsetting some of the benefits from automatic enrollment. Yet given the sizeable improvements in plan participation from automatic enrollment, wealth accumulation for automatically enrolled participants, net of cash-outs and penalties, remain higher than it would have been under voluntary enrollment.

Selecting Mutual Funds for Retirement Accounts (A)

2018 ◽  
pp. 1-17
Author(s):  
Phillip A. Braun
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
First Year ◽  
Retirement Savings ◽  
Defined Contribution ◽  
Management Turnover ◽  
Risk Return ◽  
Retirement Plan ◽  
Retirement Accounts ◽  
Northwestern University

Alice Monroe, a 30-year-old married mother of two, was an admissions officer at the Kellogg School of Management at Northwestern University. She was just completing her first year of service at Northwestern and qualified for the university's 403(b) retirement plan. It was early October 2017, and she had until the end of the month to decide if and to what extent she would participate in Northwestern's retirement plan–that is, how much of her salary should she put into the retirement plan, and into which mutual fund or funds should she allocate her savings? The case includes background on defined contribution and benefit plans as well as mutual funds. It goes into detail about Northwestern's retirement plan, including data on the performance of 15 of the plan's core mutual funds. The case also provides each fund's strategy, Morningstar Rating and Morningstar Category, expense ratio, assets under management, turnover rate, and historical performance for the last 10 years. Using modern portfolio theory (diversification and risk-return trade-off) and with an understanding of mutual fund fees and the tax advantages of retirement savings, students will decide how much Alice should invest and in which mutual funds.

scholarly journals Good job, good pension? The influence of the workplace on saving for retirement

2018 ◽  
Vol 39 (11) ◽  
pp. 2483-2501 ◽  
Author(s):  
Lynne Robertson-Rose
Keyword(s):  
Qualitative Interviews ◽  
Retirement Savings ◽  
Defined Contribution ◽  
Retirement Benefits ◽  
Utility Company ◽  
Proactive Approach ◽  
The United Kingdom ◽  
Income Adequacy ◽  
Embedded Case Study

AbstractMost private-sector employees in the United Kingdom (UK) are automatically enrolled into individualised defined contribution (DC) pension accounts. In a DC environment, income adequacy in retirement is highly dependent on the decisions that individuals make earlier in their lives. The ease with which they move into employment, and the pension support that they then receive from their employer, can be critical in determining outcomes. This paper discusses how employees respond to workplace pension schemes and the circumstances under which they assess the suitability of their contributions. The findings are based on an embedded case study comprising qualitative interviews with 25 employees of a large UK utility company. Participants were selected on the basis of socio-economic similarity. The research concluded that fixed-term employment negatively impacted on saving for retirement, both with respect to scheme membership and to the level of saving. Furthermore, it was found that the employment context had an influence upon retirement savings behaviour. The proactive approach of the employer in providing retirement benefits, and the trust that employees had in their employer, positively influenced membership and contribution levels. In addition to employer endorsement effects, both the encouragement of older work colleagues and workplace norms had a role to play in influencing how successfully individuals prepared for retirement.

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