NEW YORK, April 27, 2016 /PRNewswire/ -- J.P. Morgan
Asset Management today released a new piece, "Retirement Reset: How
re-enrollment can help strengthen U.S. retirement
security." The paper explores the state of the U.S. retirement
system 10 years after the passage of the Pension Protection Act
(PPA), finding that although progress has been made for defined
contribution (DC) participants, many Americans remain woefully
unprepared for a retirement that may last upwards of 30 years.
"The Pension Protection Act sets a strong foundation and made
great strides, creating new opportunities for stronger DC plans and
greater potential for increased retirement security. But, the
reality is the U.S. retirement system is still falling short," said
John Galateria, Head of North America Institutional, J.P. Morgan
Asset Management. "Although some progress has been made on the
savings front, advances have been far more limited in getting
participant assets allocated appropriately to help get them across
the retirement finish line."
The paper assesses key accomplishments of the PPA, including
establishing a legal framework for the use of automatic enrollment,
introducing automatic contribution escalation, and creating the
Qualified Default Investment Alternatives (QDIA), which gives plan
sponsors the greatest opportunity to ensure that employees who do
not chose to make an investment election can still be invested
appropriately for their age and risk profile. After the PPA was
enacted and the Department of Labor finalized its QDIA rules, asset
managers, financial advisors, consultants and plan sponsors began
to think about how to use the QDIA to tackle the critical issue of
poor asset allocation for employees who were already enrolled in a
DC plan. The strategy they developed was the investing reset known
as re-enrollment.
Re-enrollment quickly improves asset allocation for many
participants, especially when the plan's QDIA is a target date fund
(TDF). Because participants are defaulted into a TDF based on their
age, the asset allocation reflects their investment time horizon,
while the fund's "glide path," which changes with a participant's
age, helps ensure participants maintain an appropriate allocation
over time. For plan sponsors, a re-enrollment can bolster
confidence that participants are on a sensible investing path and
have a decent chance of staying on that path.
"It's important not to underestimate the damage that can be
caused by inappropriate asset allocation by DC plan participants.
Re-enrollment is one action plan sponsors can take that can quickly
help move the needle toward better retirement outcomes for plan
participants," said Anne Lester, Head of Retirement Solutions, J.P.
Morgan Asset Management. "We are optimistic and have every
confidence that as the adoption of re-enrollment continues to
increase it will go a long way toward strengthening retirement
security for millions of American workers. As we approach the
10-year anniversary of the PPA, we're calling on the entire
industry of plan sponsors, financial advisors, consultants and
record keepers to carefully evaluate the benefits of this
strategy."
To learn more about J.P. Morgan Asset Management's leading DC
investment strategies, product innovations and resources for
advisors and plan sponsors, please click here, or to view the full
paper "Retirement Reset: How re-enrollment can help strengthen U.S.
retirement security" please click here.
About J.P. Morgan Asset Management
J.P. Morgan Asset
Management, with assets under management of $1.7 trillion, 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. (NYSE: JPM), the parent company of J.P.
Morgan Asset Management, is a leading global asset management firm
with assets of approximately $2.4
trillion and operations in more than 60 countries.
Information about JPMorgan Chase & Co. is available at
www.jpmorganchase.com.
J.P. Morgan Asset Management is the marketing name for the asset
management businesses of JPMorgan Chase & Co. and its
affiliates worldwide.
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SOURCE J.P. Morgan Asset Management