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Rating:MF Conference Emphasizes Retirement, DC Plans Not Rated 4.0 Email Routing List Email & Route  Print Print
Monday, May 22, 2006

MF Conference Emphasizes Retirement, DC Plans

Reported by Neil Anderson, Managing Editor

An accidental visitor to the Investment Company Institute's 48th annual general membership meeting last week in Washington, D.C. could be forgiven for believing they were at a conference for 401(k) companies. Instead of focusing exclusively on mutual funds, the ICI's conference included several discussion panels on savings and retirement issues, and the topic of defined contribution (DC) plans appeared frequently in various speeches.

The theme of retirement permeated the conference. "Our nation confronts significant challenges in meeting the needs of current and future retirees," ICI President Paul Schott Stevens told the conference attendees in a speech Wednesday.

Stevens and other speakers at the conference pointed to the rise in DC plans as a big part of the solution to the retirement problem. "Why are we seeing this rise in DC investing?" Stevens asked. "Because DC plans reflect reality -- the reality of a fluid economy and mobile workforce, the hard fact that lifetime employment is increasingly rare."

Increasing savings definitely seems to be on the mutual fund industry's collective mind. "How can we encourage workers to start saving early, and to keep saving through their working years?" Stevens asked. One discussion session, entitled "Encouraging Savings: Helping Workers Save", focused entirely on this question. In another session, Harvard University professor of economics David Laibson discussed behavioral economics and its implications for employees' decisions regarding their 401(k) plans.

One presenter, senior vice president Tom Johnson of Mass Mutual Financial Group, even described so-called "annuity laddering", which combines equities and guaranteed income annuities, a non-investment product. In a talk on "Transforming Savings Into Income," Johnson said people want to create their own personal pension plans. "We need to create that kind of baseline guarantee," he said.

Barry Schub, executive vice president of New York Life Investment Management Retirement Plan Services, agreed. "People will be on a path to a more DB-like result," he said.

More time at the conference seemed to be spent speculating on the future of the DC industry than that of the mutual fund industry. "The DC system holds enormous promise to provide a solid retirement for today's workers," Stevens opined.

Many of the speakers had their own predictions. "We are projecting auto-enrollment as the standard plan design," said James Cornell, senior vice president FIRSCo Plan Sponsor Strategy at Fidelity Investments. "We're also moving towards a more personalized experience," Cornell added. "I donít think employee meetings [on 401(k) plans] will happen anymore."

"Age-based funds are going to grow and grow," Schub said. On defaulting some of retirement savings into annuities, Schub added, "That is definitely coming." 

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