Ideas to improve plan results Jennifer Schuessler Regional Sales - - PowerPoint PPT Presentation
Ideas to improve plan results Jennifer Schuessler Regional Sales Director Ashley Taylor Relationship Manager FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION. Agenda New research that highlights drivers
FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Jennifer Schuessler – Regional Sales Director Ashley Taylor – Relationship Manager
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FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Agenda
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Who is Empower?
We have one goal: to help people replace — for the rest of their lives — the income they made while working. Robert L. Reynolds
retirement plans and approximately 7 million participants1
with a long-term perspective
an experienced senior leadership team
improvement designed to increase participants’ retirement readiness
1 Empower Retirement 06/2015PT247000 10/15
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FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Empower service platform
Segment Empower participants
Core 401(k)
<$50 million 1.6 million
Large 401(k)
$50 million to $500 million .6 million
Mega 401(k)
>$500 million 1.8 million Nonprofit/403(b) 1 million Government 2 million
Core 401(k) Large 401(k) Mega 401(k) Nonprofit/ 403(b) Government
Empower serves over $10b in defined benefit and non-qualified plans
Sources: Spectrem 401(k) PPT share, 2014; PLANSPONSOR 403(b) Guide PPT share 2014; Govt RFP analysis, asset share 2013 Combined GWF, Putnam and RPS market share; includes institutional Empower data as of 12/31/2014.
FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
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What are the leading indicators of success?
New research points to successes and shortfalls
Americans, ages 18–65, conducted online 12/16/14–1/14/15
household might expect to replace beginning at age 65
the retirement age of 65, as well as an estimate for future Social Security benefits
design and professional advice
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Lifetime Income ScoreSM V
The average household is
Source: Empower Retirement, “Lifetime Income Scores V: Our Latest Assessment of Retirement Preparedness,” March 2015
0% 20% 40% 60% 80% 100%
Projected Income Replacement
58%
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Lifetime Income ScoreSM V
Those eligible for workplace savings plans enjoy a
Source: Empower Retirement, “Lifetime Income Scores V: Our Latest Assessment of Retirement Preparedness,” March 2015
0% 20% 40% 60% 80% 100%
Eligible Not eligible
advantage
Projected Income Replacement
74% 42% 58%
Total
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Impact of using an advisor
Lifetime Income ScoreSM V
Americans who work with an advisor have a nearly
Source: Empower Retirement, “Lifetime Income Scores V: Our Latest Assessment of Retirement Preparedness,” March 2015
0% 20% 40% 60% 80% 100%
Paid Advisor No Advisor
advantage
Projected Income Replacement
82% 55% 58%
Total
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Lifetime Income ScoreSM V
Savings rate: the dominant driver of success
Household Savings Rate 48% 54% 60% 76% 106% 133%
0% 20% 40% 60% 80% 100% 120% 140% 0% savings >0 % but less than 3% 3% >3% but less than 10% 10% and greater 15% and greater
Lifetime Income Score
Median Lifetime Income Score = 58%
Results are based on a survey of 4,148 working Americans between the ages of 18 and 65, with segments weighted in accordance with U.S. Census parameters for all working adults. The survey was conducted by Brightwork Partners LLC in Q4 2013.
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FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Lifetime Income ScoreSM V
56% of auto-enrolled plans start at 3% or less
48% 54% 60% 76% 106% 133%
0% 20% 40% 60% 80% 100% 120% 140% 0% savings >0 % but less than 3% 3% >3% but less than 10% 10% and greater 15% and greater
Household Savings Rate Lifetime Income Score
Median Lifetime Income Score = 58%
Results are based on a survey of 4,148 working Americans between the ages of 18 and 65, with segments weighted in accordance with U.S. Census parameters for all working adults. The survey was conducted by Brightwork Partners LLC in Q4 2013.
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FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Lifetime Income ScoreSM V
Effect of auto-escalation 92% 73% 74%
0% 20% 40% 60% 80% 100%
Auto No Auto All Plans Projected Income Replacement
Source: Empower Retirement, “Lifetime Income Scores V: Our Latest Assessment of Retirement Preparedness,” March 2015
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42% 74% 82% 82% 92% 106%
No access to workplace plan Access to workplace plan Auto enrolled in plan Works with advisor Has auto escalation Deferring 10%+
What are key steps to improving retirement?
Empower Retirement Lifetime Income Study, 2015. Source: Household data estimated from the Current Population Survey and Bureau of Labor Statistics.
Replacement percentages of pre-retirement income
Median Lifetime Income Score = 58%
Median household replacement score
58%
Why are plan sponsors apprehensive?
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How will employees react to auto-escalation?
A strong majority of Americans are open to auto-escalation
Source: Empower Retirement’s Lifetime Income Study, 2015
“Absolutely certain to use this feature”
“Very likely to use this feature”
“Somewhat likely to use this feature”
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10 20 30 40 50 60 70 80 Baby Boomers Gen X Gen Y
Retirement Paying down debt Health-care expenses Major expenses/purchases Child's education
Savings goals by demographic group
Source: Empower Retirement, “Lifetime Income Scores V: Our Latest Assessment of Retirement Preparedness,” March 2015
Employees have different priorities – Engagement is about the message and the method
a. Coordination with other events b. Potentially schedule annual auto increase to coincide with annual merit increases
Keys to successfully adding Auto Features
a. Targeted training of management and human resources personnel who interact with the population most affected
Ideas to support implementation
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Optimize automatic plan design features to overcome employee inertia
Results
Situation
seeking guidance to optimize plan design for ideal employee
Plan design recommendations:
Employees contributing 0-3%:
with 2% annual automatic increases to a max of 15% Employees contributing 4% or more:
up to a max of 15%
Participation increased by Average contribution rate increased from
23% 7.1% 8.0%
TOWINNER
PT211676 11/14
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FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
Objectives
― Improve participation and plan awareness for participants. ― Set foundation for retirement readiness. ― Improve ADP/ACP testing results.
Strategy/Approach
― After a consultative plan design review, the plan sponsor implemented an online retroactive auto-enrollment at 3% with auto-increase up to 8%.
Automatic features to engage a young workforce
Situation
― The employee population was not focused on
and dispersed employee population in the plan.
Industry
Travel services for students
Number of employees
2,400 as of 12/31/15
Total assets
$25M as of 12/31/15
Results
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Situation
contribution rates
improvement
Objective
communication
Background
Maximizing plan participation by focusing on age groups
Results
Industry Pharmaceuticals Number of employees 1,006 Total assets $599M
Strategy/Approach
— Age 33 and Under: Now is the time to start; you have a great advantage. — Age 33 to 49: You can’t get a loan for retirement. Messaging focuses
participants face. — Age 50+: There’s still time. Take advantage of catch-up contributions.
to build credibility and encourage quick, positive decisions.
Each age group took positive action Age 33 and Under:
4.8% took action
Age 33 to 49:
9.2% took action
Age 50+:
4.0% took action
PT231090 12/15
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FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION.
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FOR INSTITUTIONAL/INVESTMENT PROFESSIONALUSE ONLY. NOT FOR PUBLIC DISTRIBUTION. Empower Retirement refers to the products and services offered in the retirement markets by Great-West Life & Annuity Insurance Company (GWL&A), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York, Home Office: White Plains, NY; and their subsidiaries and affiliates. The trademarks, logos, service marks, and design elements used are owned by their respective owners and are used by permission. Core securities, when offered, are offered through GWFS Equities, Inc. and/or other broker dealers. GWFS Equities, Inc., Member FINRA/SIPC, is a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. IMPORTANT: The projections, or other information generated by the Lifetime Income ScoreSM regarding the likelihood of various investment outcomes, are hypothetical in nature. They do not reflect actual investment results and are not guarantees of future results. The results may vary with each use and over time. The Lifetime Income Score℠ represents an estimate of the percentage of current income that an individual might need to replace from savings in order to fund retirement expenses. This income estimate is based on the individual’s amount of current savings as well as future contributions to savings (as provided by participants in the survey) and includes investments in 401(k) plans, IRAs, taxable accounts, variable annuities, cash value of life insurance, and income from defined benefit pension plans. It also includes future wage growth from present age (e.g., 45) to the retirement age of 65 (1% greater than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)) as well an estimate for future Social Security benefits. The calculations also take into account mortality rates for a variety of commonly diagnosed health conditions, including high blood pressure, high cholesterol, Type 2 Diabetes, cancer of any type, and cardiovascular disease of any type apart from high blood pressure. In addition, the model also takes into account the consistent use of tobacco on a household basis. The Lifetime Income Score estimate is derived from the present value discounting of the future cash flows associated with an individual’s retirement savings and expenses. It incorporates the uncertainty around investment returns (consistent with historical return volatility) as well as the mortality uncertainty that creates a retirement horizon of indeterminate length. Specifically, the Lifetime Income Score procedure begins with the selection of a present value discount rate based on the individual’s current retirement asset allocation (stocks, bonds, and cash). A rate is determined from historical returns such that 90% of the empirical observations of the returns associated with the asset allocation are greater than the selected discount rate. This rate is then used for all discounting of the survival probability-weighted cash flows to derive a present value of a retirement plan. Alternative spending levels in retirement are examined in conjunction with the discounting process until the present value of cash flows is exactly zero. The spending level that generates a zero retirement plan present value is the income estimate selected as the basis for the Lifetime Income Score. In other words, it is an income level that is consistent with a 90% confidence in funding retirement. It is viewed as a “sustainable” spending level and one that is an appropriate benchmark for retirement planning. The survey is not a prediction, and results may be higher or lower based on actual market returns. Source: Based on applying LIS results to U.S. Census data as of 2013 The charts, graphs, screen prints and examples contained in these materials are for ILLUSTRATIVE PURPOSES ONLY. The research, views and opinions contained in these materials are intended to be educational, may not be suitable for all investors and are not tax, legal, accounting or investment advice. Readers are advised to seek their
regulatory or investing environment. PT#236508 (07/15)
Disclosures