More sponsors open to keeping retiree assets in-plan, Cerulli says

Plan sponsors increasingly don’t mind keeping retiree accounts in-house.

According to the Cerulli Edge U.S. Asset and Wealth Management Edition released this week, more than half (54%) of 401(k) plan sponsors would prefer to keep their retired participants’ assets in their plan, rather than having them roll their assets into an individual retirement account or another employer-sponsored plan, which marks a big increase from 26% in 2019.

Among retirement plans intermediated by institutional investment consultants, the results show that 35% actively seek to retain retiree assets, while another 40% prefer to retain retiree assets — but do not go out of their way to do it.

Since institutional investment consultants generally advise larger plans, the big takeaway from the data is that size matters when it comes keeping retiree assets in-plan.

“Many larger plan sponsors are considering or implementing plan design and investment lineup changes to make their plans decumulation-friendly,” Shawn O’Brien, associate director at Cerulli, said in a statement. “As more plan sponsors strive to keep participants’ assets in-plan, asset managers should focus their retirement income product distribution on the mega plan market.” 

In terms of recommendations for asset managers, Cerulli recommends periodic check-ins with plan sponsors to assess new initiatives related to making their retirement plan more suitable for decumulation. If there are changes being made, then the plan sponsor might be willing to hear a pitch related to a new retirement income product or solution.  

“Most 401(k) and retirement plans do not offer the flexibility and customization that individual retirement accounts do. This is why it is so common for employees to roll over their retirement accounts from their employer plans to IRAs when they leave an employer or retire," said Brian Hartmann, partner at Granite Bridge Wealth Management, part of Advisor Group. "In today’s environment more than ever, a custom-tailored plan is critical for investor to achieve their financial goals and peace of mind.”