Has the Lack of Asset Diversification in DC Retirement Plans Been a Costly Missed Opportunity?
August 22, 2023
August 22, 2023
A June 2023 report by the Georgetown University’s Center for Retirement Initiatives (CRI), in conjunction with CEM Benchmarking (CEM), Has the Lack of Asset Diversification in DC Retirement Plans Been a Costly Missed Opportunity?, found that adding illiquid assets, such as private equity, real estate, and infrastructure, to the target date funds (TDFs) of defined contribution (DC) retirement plans would have resulted in a 0.15% (15 basis points) increase in return per year over a decade. When applied to all U.S. target date options, such an increase would currently represent $5 billion in additional annual net returns. For an individual participating in a DC plan, this improved return on investment, if obtained over their career, would result in an additional $2,400 per year in spending power for a retiree with $48,000 per year in retirement income.
On July 10, 2023, nine of the United Kingdom’s largest DC pension providers pledged their support for a voluntary agreement — the Mansion House Compact — to allocate 5 percent of assets in their default funds to unlisted equities by 2030.
June 27, 2023
During the 2023 state legislative sessions, at least 22 states have introduced bills to establish new retirement savings programs, amend existing programs, or form study groups to explore their options. Since 2012, at least 47 states have now acted to implement a new program or a study, or have considered legislation to establish state-facilitated retirement savings programs.
As of June 2023, three new programs have been passed by legislatures: Minnesota (auto-IRA), Missouri (a voluntary Multiple Employer Plan or MEP), and Nevada (auto-IRA), which brings the total number of state programs to 19. In addition, one existing program — Vermont — changed its program from a voluntary MEP to an auto-IRA program. States also are now actively exploring interstate partnerships, which can only help to make these programs even more efficient and low cost.
Of the now 19 state programs, eight of them (six auto-IRAs — California, Colorado, Connecticut, Illinois, Maryland, and Oregon, and two others — Massachusetts (MEP) and Washington (Marketplace)) are open to all eligible employers and workers. And just four of these state programs — CalSavers, MyCTSavings, Illinois Secure Choice, and OregonSaves — already have accumulated more than $838 million of the total program assets as of May 31, 2023.
Please join the Georgetown Center for Retirement Initiatives (CRI) for a one-hour webinar to hear from the state leaders instrumental in the passage of this year’s latest new state programs, along with an update about the progress of existing programs.
February 9, 2023
At the start of 2023, there are 16 state-facilitated retirement savings programs designed to provide workers who lack access to an employer-sponsored plan with the opportunity to save for retirement. Just three of these state programs — CalSavers, Illinois Secure Choice, and OregonSaves — already have accumulated $640 million in assets. More recently, they have been joined by three additional state auto-IRA programs that are now open to all eligible workers — MyCTSavings, Maryland$aves, and the Colorado SecureSavings Program.
Congress also passed SECURE 2.0 at the end of last year, a second set of retirement reforms that build off the SECURE Act reforms passed in 2019, intended to help encourage and support new retirement plan adoption and worker participation in those plans.
During this one-hour webinar experts shared their observations about how the latest federal reforms could reshape the retirement plan market and expand coverage and participation. In addition, three of the newest state-facilitated retirement savings programs provided updates on their progress to date.
February 17, 2022
New state-facilitated retirement savings programs are making a significant contribution to closing the gap for 57 million private sector workers who have lacked access to employer-sponsored retirement savings plans. In just the past six years, 14 states have adopted programs with the potential to reach almost 20 million of these workers.
The success of these programs is already evident. Even though many of these efforts remain in their early stages of planning and implementation, just three of these states — CalSavers, Illinois Secure Choice, and OregonSaves — have already accumulated $420 million in assets from more than 440,000 savers working for 47,000 different employers, and they are still bringing new employers and savers on board every day.
More of the new state programs are slated to begin working with employers and enrolling new savers in 2022. State leadership continues to drive innovation as states are now also looking to create interstate agreements and partner to launch such programs. Colorado and New Mexico are working on a partnership agreement, and more seem likely to consider this approach to increase retirement savings access affordably and effectively.
During this one-hour webinar several of these state-facilitated retirement savings programs shared their experiences to date, how these new program continue to innovate in their design and implementation, and what the experience has been for both employers and employees.