Description: This paper examines the so called 1/n investment puzzle which has been observed in defined contribution plans whereby some participants divide their contributions equally among the available asset classes. It has been argued that this is a very naive strategy since it contradicts the fundamental tenets of modern portfolio theory. We use simple arguments to show that this behavior is perhaps less naive than it at first appears. We show that when we account for estimation error the 1/n rule has some advantages in terms of robustness and we demonstrate this with numerical experiments. From The Actuarial Research Council, Volume 38, No. 1.

Description: The editorial provides an overview of articles in this issue that explore and illustrate solutions to current retirement challenges.

Description: The article endorses broader use of lifetime income in DC plans. It explains why the use of DB plans will continue to decline. The article points out that plans sponsors will not willingly take on additional ERISA fiduciary exposure. The article endorses three regulatory reforms that would increase the use of lifetime income in DC plans. 1. A robust annuity issuer safe harbor that would free employers from fiduciary exposure for putting an annuity provider on the DC platform. 2. A requirement that a plan offer a lifetime income option to qualify for the 404(c) safe harbor. 3. A revision to 404(c) to allow plan sponsors to allocate part or all of the employer match to lifetime income.

Description: Presents a tool for actuaries to analyze defined contribution plans. Analytical Hierarchy Process weights plan features. Result is accessible to non-actuaries.

Description: Provides preview of the two essays published in this Pension Section News and encourages dialogue, particularly on the 401(k) essay and the ideas for change.

Description: This article illustrates how today’s retirement system tools have potential to achieve financially secure retirement and lists options for system improvement.

Description: Discussion of FinTech including PIMCO research on 401(k) use of managed accounts and observations about cybersecurity, genetic data, and retirement spend down.

Description: This article, another in the popular series devoted to tax basics, provides an overview of how the Employee Retirement Income Security Act of 1974 (ERISA), the law governing employment-based retirement and health plans, impacts the use of annuities in pension and 401(k) plans. The article explains which types of plans are subject to ERISA, and which are not; why the concept of "plan assets" is critical; what duties an insurance company or distributor might take on when an annuity is placed with a retirement plan; and finally what disclosures may be required. The article also includes a brief introduction to terminal funding annuities. This article is intended for those with no prior experience in ERISA. Because the vast majority of retirement assets are saved originally in employment based plans like pension and 401(k) plans, understanding the basics of ERISA is important for anyone who will have a career in annuities and life insurance.

Description: This report presents a framework that could be used by employers and employees to assess defined contribution retirement plan benefits.

Description: In this article, the author discusses the impact automatic enrollment AE in 401k programs has on plan participants. From the Pension Section News, October 2011, Issue No. 75.