Those who know me, and my work know that I am crusading for improvements in retirement savings plans, especially in target date funds (TDFs), the most popular Qualified Default Investment Alternative (QDIA).
My examples of plans that are doing the right thing include the Federal Thrift Savings Plan (TSP) and the Office and Professional Employees International Union (OPEIU) National Retirement Savings Plan (NRSP).
This commentary details the OPEIU NRSP. It explains why I believe it is a model for what a 401(k) plan should be.
With more than 100,000 members across more than 60 locals, OPEIU is one of the largest AFL-CIO unions. Its national retirement plan, launched in 2017 by President Richard Lanigan, is designed to provide efficient management of retirement assets for local bargaining units and employer plans. It is currently at $93 million with more than 1,000 participants.
Labor and Management trustees lead eight service providers. It takes a team. I am president of Target Date Solutions that provides target date glidepaths.
Service providers
- Recordkeeper
- 3(38) investment advisor
- Bank
- Law firm
- Administrator
- Accountant
- Glidepath provider
- Relationship manager
Participant benefits
Save and protect is the formula for a retirement with dignity. Here are the ways that the OPEIU NRSP encourages savings with options for:
- Auto enrollment
- Auto escalation
- Employer match
- Financial wellness education/tools
- Access to licensed, non-commissioned financial advisors on a no cost, unlimited basis
- Very low fees
- Annuity-like feature
Other savings plans provide some of these incentives, but few do so with very low fees. And even fewer protect these savings in their TDFs as participants near retirement. This is a breach of the fiduciary duty of care that fails the “Protect” part of “Save and Protect.” Most TDFs ignore Sequence of Return Risk explained in the following image:
The OPEIU NRSP protects participant savings with personalized target accounts (PTDAs) that blend managed accounts with target date glidepaths, where several glidepaths are provided from which participants can choose. The OPEIU NRSP uses PTDAs that employ a patented and time-tested family of glidepaths that protect against Sequence of Return Risk shown in the following.
The OPEIU NRSP also protects with IncomeFlex Target, an in-plan, no commission Guaranteed Minimum Withdrawal Benefit (GMWB) for life offered by Empower. This GMWB secures guaranteed lifetime income while capturing potential market gains and preventing losses to that income during market downturns. The only feature a fixed annuity has in common with a GMWB is that it also provides income for life. The GMWB also differs as its market value is paid to participants beneficiaries upon passing unlike a fixed annuity. Thus, IncomeFlex effectively addresses major financial fears of retirees and near term retirees; namely the fear of outliving one’s savings that drives investors to higher risk investments.
Self-directed participants have a rich array of choices. These participants are presumed to be financially sophisticated so they will protect their lifetime savings as needed.
- 12 low-cost diversified mutual funds
- Directed brokerage with 8,755 mutual funds, including 67 ESG funds
- Personalized target date accounts
- Some have grandfathered non-personalized TDFs
- IncomeFlex GMWB
Benefits for trustees who opt in to the NRSP
These trustees are relieved of most of their fiduciary responsibilities, including proxy voting, freeing them up for other activities and insulating them from legal action. They can be included in the ongoing supervision of the NRSP.
Of course, the biggest benefit is participant wellbeing. OPEIU members are working people who look out for one another.
Conclusion
The OPEIU NRSP is one of my posterchildren for doing what is right for plan participants because it truly encourages savings (at very low cost) and provides protection of those savings—the best formula for retirement with dignity.
Surveys report that fiduciaries and participants want to protect people nearing retirement but most TDFs do not provide this protection. The OPEIU NRSP is a notable exception.
OPEIU International has built the NRSP in the “Best Interests” of OPEU Members. Based upon their collective decisions, OPEIU Bargaining Units should be given the opportunity to stay in their existing employers’ 401(k) plan or “spin off” into the NRSP.
The NRSP is open to existing local OPEIU sponsored plans, employer sponsored plans with OPEIU bargaining units, selected unaffiliated plans, and to plans that are starting up.
SEE ALSO:
• Trio of TSP Funds Up Over 15% in 2023
Ron Surz is CEO of Target Date Solutions (TDS), co-host of the Baby Boomer Investing Show (BBIS), and author of the book "Baby Boomer Investing in the Perilous Decade of the 2020s." TDS licenses target-date fund usage of Ron’s patented Safe Landing Glide Path® (SLGP) that actually protects beneficiaries as they approach retirement. Individual investors can follow the SLGP at Age Sage, an educational interactive website. The BBIS educates baby boomers on the risks and rewards in contemporary investing, and Ron’s book is a tour of these shows. He can be reached at Ron@TargetDateSolutions.com.