J.P. Morgan Defined Contribution Survey Shows Plan Sponsors Aiming to Strengthen Plans, Finds Fiduciary Misperceptions Remain

NEW YORK, July 27, 2017 /PRNewswire/ -- J.P. Morgan Asset Management today released proprietary data from its third biennial survey of U.S. plan sponsors. The resulting white paper, "How plan sponsors are sharpening their focus to strengthen plans and improve outcomes," reveals that DC plan sponsors feel a growing sense of responsibility for participants' financial wellness and are more intent than ever on enhancing their plans to improve retirement outcomes for their participants.

"We are encouraged by the progress we see in how plan sponsors are thinking about and acting to strengthen their plans," said Catherine Peterson, Managing Director, Global Head of Insights Programs at J.P. Morgan Asset Management. "Our latest findings confirm that the evolution of DC plans continues. Plan sponsors and their organizations are transitioning from a traditional view of their DC plans—for example, as a way to attract and retain employees—to a sharper focus on achieving the ultimate retirement outcome: helping as many employees as possible reach a financially secure retirement. This focus is evident in plan sponsors' stated philosophies, objectives and, most important, their actions—but challenges still remain."

Results from the 2017 Retirement Insights survey of 968 plan sponsors, conducted to better understand what drives retirement plan decision-making, include these key themes and findings:

Focusing on retirement outcomes
The research indicates that plan sponsors' sharper focus on participants' retirement outcomes begins with the growing sense of responsibility they feel for their employees' financial well-being and carries over to:

• the increasing importance they assign to outcome-oriented plan goals and success criteria, such as helping ensure participants have sufficient income in retirement
• the factors driving their plan design decisions
• their greater adherence to a philosophy focused on proactively placing participants on a solid saving and investing path

Linking goals and philosophy to action
Plan sponsors are also linking their sense of responsibility, goals and proactive placement philosophy to actions. The survey examines what plan sponsors are doing to strengthen their plans:

• implementing automatic enrollment: 85% of large plans (with assets of $250 million and over); 64% of all plans
• implementing automatic contribution escalation: 77% of large plans; 1/2 of all plans
• adding target date funds (TDFs) to investment lineups: 80% of large plans; 62% of all plans
• choosing TDFs as their qualified default investment alternative (QDIA): 93% of large plans with QDIAs; 78% of all plans with QDIAs
• conducting/planning to conduct a plan re-enrollment (albeit at a slower pace): 20% of large plans; 13% of all plans

No time for complacency—opportunities to improve retirement outcomes
The above-mentioned progress notwithstanding, savings rates are still too low and some plan sponsors are not confident that their participants have an appropriate asset allocation. While the percentages of plans implementing and/or considering automatic plan features and strategies are encouraging, too many plans have not yet taken advantage of the potential for these tools to help:

• improve participant savings behavior
• simplify investment decisions
• allow inertia (the human tendency toward inaction) to work for, not against, participants

The report identifies factors that may be impeding DC plan evolution. More important, it points to opportunities to address misperceptions, shrink information gaps and enhance understanding of the features and strategies available to help plan sponsors continue strengthening their plans.

Fiduciary misperceptions
Under ERISA, fiduciaries have the obligation to prudently select and monitor a plan's investments. While all plan decision-makers surveyed define their responsibilities as ones that would categorize them as fiduciaries, 43% of these plan sponsors are not aware that they are plan fiduciaries—a disappointing finding, unchanged from our 2015 results.

"Our survey suggests that some DC plan sponsors, to varying degrees, lack clarity regarding their fiduciary status and the nature of their responsibilities," continued Meghan Jacobson, CFA, Executive Director, J.P. Morgan Asset Management. "A clear understanding of fiduciary status, responsibilities, liabilities and protections can help ensure that DC plans are administered and continue to evolve for the benefit of participants, while protecting plan sponsors and their organizations. If plan sponsors are not certain that each individual plan fiduciary understands their roles and responsibilities, they may want to reach out to experts who can help them improve fiduciary awareness and comprehension."

Implications
Seizing these opportunities to help ensure the continued evolution of DC plans is a necessity and will require a collaborative effort:

• Participants should be actively engaged in planning for their retirement.
• Plan sponsors can deepen their understanding of participant behavior, gain clarity on their fiduciary roles and responsibilities and set outcome-oriented goals for their plans.
• Plan providers and financial advisors/consultants can help plan sponsors sharpen their view at the individual participant level, stay apprised of regulatory developments and maintain awareness of plan innovations.
• Policymakers can seek to incorporate a broader range of viewpoints—from participants, plan sponsors, providers and financial advisors/consultants—when formulating regulations and providing guidance.

"Steps have been taken to strengthen DC plans but there are still challenges to address and opportunities to seize," concluded Ms. Peterson. "Our surveys indicate that considerable progress has been made in strengthening DC plans for their role as a primary building block of retirement security. But this is not a time for complacency. A strong, concerted effort is needed to ensure the progress never stops."

For additional insights from this survey, or to explore the research by plan size and theme, visit our interactive website at https://dcresearch.jpmorganfunds.com/home. Or, to learn more about J.P. Morgan Asset Management's leading defined contribution investment strategies, product innovations, resources and Retirement Insights program for advisors and plan sponsors, please click here.

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 third plan sponsor survey on this topic.

From January 4 through January 31, 2017, the firm partnered with Mathew Greenwald & Associates, a market research firm based in Washington, D.C., to conduct an online survey of 968 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 $1.5 trillion (as of June 30, 2017) 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. JPMorgan Chase & Co. JPM, the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.6 trillion (as of June 30, 2017) and operations worldwide. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

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SOURCE J.P. Morgan Asset Management