This past year, employers put more emphasis on helping their employees save for retirement. Employers are offering more tools and resources that are designed to get good retirement income for their employees, says Rob Austin, Aon Hewitts director of retirement research. Employers arent just offering a match for 401(k) plans, he says, theyre providing other high-value, low-cost products.
Automation features continue to be popular, Austin says, as are more relaxed eligibility requirements employers have extended retirement benefits to part-time and temporary employees and a majority of workers can sign up on their first day of employment.
Also see: Accelerating auto-escalation
Furthermore, Austin says more employers are moving away from mutual funds and into separately managed accounts. Exchange-traded funds are becoming a more popular retirement vehicle, too, says Vern Sumnicht, founder and CEO of iSectors, a Wisconsin-based outsourced investment firm. Theyve been growing like crazy, he says. Theyre going to continue to grow.
Also see: Exchange-traded funds gaining popularity
Larger firms are now offering robo-advising, and it will be interesting to see the impact it has on advisers, says Dave Evans, senior vice president at the Independent Insurance Agents and Brokers of America. Going forward, Evans wonders what role government will play in retirement citing Illinois recent approval of a statewide private sector retirement program and whether other states will follow suit.
More focus on retirement is evidence that employers are taking a holistic approach to their entire benefits package focusing on the physical, financial and mental health of their workforce, says Rob Shestack, senior vice president and voluntary benefits national practice leader at AmWINS Group Inc. Its all part of this wellness balance, he says. A stool cant stand on two legs.
That approach will continue in 2015, says Betsy Dill, Mercers U.S. innovation leader. If a person is struggling to pay their mortgage, Dill says, they wont be thinking about retirement. We wont have people focusing on retirement until theyre able to get the rest of their financial health in order, she says.
As employers integrate their health strategy, theyre using one vendor for all benefits, says Beena Thomas, Optums vice president of health and wellness. Affordability still continues to remain paramount for employers, she says.
Prolonged low interest rates dont make saving for the future any easier, Evans says. Thats definitely had an impact on retirement savings, he says. Will interest rates remain low? No one can say for sure.
The industry is hopeful interest rates will increase next year, but they could remain low, says Matt Sicking, a senior consultant at Towers Watson. If rates do increase, he says, there will be annuity buyouts for retirees next year.
New fiduciary definition
The Department of Labors new fiduciary rule, which many expect will broaden the definition, could be released in January. Thats an important item on our agenda, says Judy Miller, director of retirement policy at the American Society of Pension Professionals and Actuaries. One of Millers main concerns is how the new rule will impact rollover claims.
The DOLs first proposal to broaden the definition of fiduciaries in 2010 was withdrawn after opposition from the financial industry. In May, a re-proposal slated for August was postponed until January 2015 and many in the industry are predicting more delays. Tax reform is another legislative issue ASPPA will be watching closely, Miller says.
Top court cases of 2014
In Heimeshoff v. Hartford Life & Accident Insurance Co., the case involved an appeal of an insurance companys denial of an employees long-term disability benefit claim under her employers insurance plan. Julie Heimeshoff filed suit against the insurance company in district court, but after the plans stated three-year statute of limitations had expired.
The district court and an appeals court dismissed the case under the statute of limitations. A unanimous Supreme Court agreed that because ERISA does not mandate a statute of limitations, the court must uphold the plans language.
This year, the high court also agreed to hear Tibble v. Edison International, a case in which the plaintiffs argue their ERISA plan fiduciaries breached their duty of prudence by offering higher-cost, retail-class mutual funds to 401(k) plan participants, even though identical lower-cost institutional-class mutual funds were available.
Also see: Supreme Court to hear 401(k) fee case
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