Oct. 16, 2012
AllianceBernstein L.P. (AllianceBernstein
) today announced new research showing that although more than 50% of plan sponsors surveyed offer target-date funds (TDFs) in defined contribution (DC) plans, only half of them are using TDFs as their default and are therefore missing out on critical fiduciary safe harbor protection available under the Pension Protection Act of 2006 (PPA). The research also shows that plan participant use of and satisfaction with TDFs continues to grow, even in the face of several years of stock market underperformance.
AllianceBernstein recently conducted its eighth annual
survey of plan participants and third biannual survey of plan sponsors. The findings offer a comprehensive look at the behaviors, concerns and trends related to DC plans. The full report on the findings of these surveys is available at
"Even in the wake of a continuing decline of Social Security and defined benefit plans as primary sources for retirement income, our recent research shows that many plan sponsors are still struggling to find the best way to structure their DC plans," says
, Head of AllianceBernstein's Defined Contribution Client Experience. "While more and more sponsors recognize the benefits of offering an age-based, asset-allocation investment solution to their participants, they fail to realize valuable fiduciary protections by not designating these funds as their plan's default."
KEY PLAN SPONSOR FINDINGS
QDIAs: The Overlooked Advantage:
Qualified default investment alternatives (QDIAs) provide safe harbor protection for plan sponsors and often offer better asset allocation for participants than they might have if they constructed their allocation on their own. However, this year's survey shows that many sponsors offering TDFs are underutilizing these default benefits.
- Low TDF default : Of the sponsors offering TDFs, only 50% use a TDF as the default.
- Lacking safe harbor default: Of the 50% of sponsors offering a TDF, but not using it as the default, an alarming 83% have no default at all or are still using a stable value fund, an equity fund or a bond fund - none of which are QDIAs - as the default.