Investment Re-enrollment Can Improve Retirement Outcomes [Video]

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Are your plan participants properly allocated or could they benefit from an investment re-enrollment?

Investment re-enrollment – the process of requiring participants to reconfirm their investment elections, then re-allocating their balance into the plan’s qualified default investment in absence of an election – can be very impactful to overall plan health and the retirement outcomes of your employees.

The Process

As part of an investment re-enrollment, participants would be notified that, as of a certain date, their current investment allocation will be transferred to the plan’s qualified default investment alternative (QDIA) option, which is typically an age/risk-based target date fund (TDF) or other age/risk-based asset-allocation model. If a participant does not want to be included in the investment re-enrollment, they may opt-out of this action prior to, or at any time after, the transfer date.

The Objective

Many plan sponsors feel that they have no ability to help their employees with their investment selections, or they have subscribed to some of the common misperceptions about investment re-enrollment and are hesitant to take action.

The underlying premise of an investment refresh, or investment re-enrollment, is that participants do not always make prudent investment decisions and/or inertia takes over.  The reality is, many individuals tend to “set it and forget it”.  We frequently find that, although the vast majority of participants are deferring current contributions into the plan’s QDIA, there are many times when individuals make an active investment election for new contributions but never go back and re-allocate prior contributions. This is often an interesting and contradictory fact that can be attributed to a conscious act, simple neglect, or potential loss aversion, but the reality is that it may be contradictory to the participant’s actual intent or their best interest. In addition, we also know that there is often a mismatch between the level of risk participants tell us they are comfortable with and the risk level in the actual portfolio they have constructed. In some cases, this can expose you as plan sponsor to additional and unwanted fiduciary liability. An investment re-enrollment can provide significant help to employees who may not realize they need assistance and, as a qualified default, can help better protect the plan fiduciaries.

Check out the informative video from American Funds above to illustrate how an investment re-enrollment could benefit your employees!

Representatives offer products and services using the following business names: Summit Group of Virginia LLP – insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA/SIPC – securities and investments | Ameritas Advisory Services (AAS) – investment advisory services. AIC and AAS are not affiliated with Summit Group of Virginia LLP or Capital Bank & Trust | American Funds. Products and services are limited to residents of states where the representatives are registered. This is not an offer of securities in any jurisdiction, nor is it specifically directed to a resident of any jurisdiction. As with any security, request a prospectus from your representative. Read it carefully before you invest or send money. A representative will contact you to provide requested information. Representatives of AIC and AAS do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.

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