Building a Better Retirement System
It’s conventional wisdom that defined contribution plans are supplanting defined benefit plans. But a presentation at a recent policy forum demonstrated that not everyone is content to simply accept that is just how it is and all there is.
StoneHedge Global Partners CEO and Managing Director Bill Jasien is one of them. “You can’t just swing from a traditional DB plan to a traditional DC plan,” he told attendees at the Mid Atlantic Public Forum Lincoln Financial Group held in Washington, D.C. on Dec. 6. He argued in favor of a more hybrid approach.
Jasien is not a fan of how DC plans currently work, telling attendees that in his view they “have to change” and are “not working the way they should work and could work.”What to Do
One of the ways Jasien suggests to address that is to consider how to make DC plans have the “look and feel” of DB plans. And at least some of the features he identified that help accomplish that already are implemented by some plans, such as automatic enrollment and automatic escalation. Other automatic features he enumerated include automatic investment management, patches that plug investment “leaks” and better hold assets, and automatic payouts.
Jasien proposes what he calls a targeted retirement income plan whose features include:
- algorithmic-driven technology, with mobile access;
- leveraging networks and communities; and
- implementation of the Department of Labor’s fiduciary rule.
“Here to stay” is how Jasien characterizes algorithmic-driven technology — a euphemism for robo-advisors — calling their use “too powerful to turn our back on.” He also believes that the fiduciary rule will stay in place.It’s all About Design
Ultimately, Jaisen argues, “It’s all about plan design.” That trumps communication, to Jaisen. “We’re talking past the ‘regular guy,’” he says, further asserting that communication efforts have been a waste.
Jasien holds efforts to change Millennials’ retirement saving behavior in similar regard, saying “We’ve tried to change behavior. We’ve really tried,” but that he thinks those efforts have only “succeeded around the edges.” But if we really want to change their behavior, he argues, “we’ve got to change design.”