Large and Mega Plan Sponsors Work to Become the Retirement Destination of Choice

April 12, 2023 — Boston

Asset managers should focus their retirement income product distribution on the mega plan market

Plan sponsor interest in keeping retiree assets in-plan is increasing, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition. More than half (54%) of 401(k) plan sponsors prefer to keep their retired participants’ assets in their plan, as opposed to having participants roll their assets into an individual retirement account (IRA) or another employer sponsored plan, a notable increase from 26% in 2019.

When looking specifically at plans intermediated by institutional investment consultants, 35% actively seek to retain retiree assets and an additional 40% prefer to retain retiree assets but do not actively seek to retain them. Considering the size of the plans that institutional investment consultants advise, this data confirms what many industry stakeholders suspect—that interest in keeping retiree assets in-plan is greater among plan sponsors in the large and mega plan market than those in smaller plan asset segments.

“Many larger plan sponsors are considering or implementing plan design and investment lineup changes to make their plans decumulation-friendly,” says Shawn O’Brien, associate director. “As more plan sponsors strive to keep participants’ assets in-plan, asset managers should focus their retirement income product distribution on the mega plan market.”

Cerulli recommends asset managers’ key account managers and consultant relations personnel schedule periodic check-ins with plan sponsors to assess any progress or new initiatives related to making their retirement plan more suitable for decumulation. From there, asset managers can more confidently assess whether the plan sponsor will be open to considering new retirement income products or solutions for their plan.

“Overall, growing interest from plan sponsors in making their plans more retiree-friendly creates an opportunity for asset managers and retirement plan providers to satisfy a nascent, albeit largely unmet, need for more effective, comprehensive in-plan decumulation solutions,” says O’Brien. “Innovations in in-plan decumulation will benefit mass market, middle market, and certain mass affluent retirement investors who are often ignored by the traditional wealth management industry,” he concludes.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Asset and Wealth Management Edition, April 2023 Issue.

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