Nationwide will now allow plan sponsors to automatically default participants into a protected retirement solution through its Dynamic Default feature, the firm announced in a release.
Employers with defined contribution (DC) plans will be able to select several default investment options based on a participant’s age. Per Nationwide, the Dynamic Default solution starts once a participant is enrolled in the plan. If a participant does not select their own investment, they will be added into an initial default fund and their assets will remain there until action is taken. Participants will eventually move from the initial default fund to a second default investment, like a protected retirement solution, as they near retirement.
“We know that investing for the long-term means managing longevity and market risk, and retirement plan participants want more help from their employers – particularly as they get closer to retirement,” said Cathy Marasco, leader of Nationwide’s Protected Retirement team. “While defaulting new participants into an investment option upon enrollment is a great first step, there is no one-size-fits all solution, so it makes sense that participants may need to transition to a different type of investment as they age and face the risks of market volatility or outliving their retirement income. And we know that defaults work. Historically, 8 in 10 participants have entered default options when offered, and 70% remain in that option five years later.”
The new feature comes as Nationwide sees a surge of adoption among in-plan protected retirement solutions. According to the firm, as of the first quarter of 2024, 6,931 plans have offered in-plan protected retirement solutions supported by Nationwide. This has amounted to $4.95 billion in assets under management (AUM) for 64,372 participants.
It’s a sizable jump says the firm, from 1,042 plans, $1.14 billion in AUM and 52,314 participants a year ago.
The growth could stem from a rising interest in retirement income solutions among participants and plan sponsors in DC plans. A Defined Contribution Consultant Research study from T. Rowe Price last found that employers are steadily adopting the feature, from 8% in 2021 to 19% in 2023. Just last week, LIMRA announced that total U.S. annuity sales jumped 21% in the first quarter of 2024, for a total of $113.5 billion in sales.
Similarly, a Nationwide Retirement Institute survey last year reported that more employees are showing interest in “pension-like” retirement plans. The survey found that 73% of 401(k) participants ages 45 and over wish they were offered a guaranteed income stream within their employer’s plan.
“Employers are recognizing that their participants want and need help translating their savings into retirement security,” added Eric Stevenson, president of Nationwide Retirement Solutions. “The key is not just making these solutions available but making them automatic for employees who don’t know where to start.”
SEE ALSO:
- 401(k) Participant Interest in Annuities Surges, LIMRA Says
- DC Employers Increasingly Offer Retirement Income Solutions
- Older Workers Sense Impact of Student Loan Repayments
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
