Nevin's Data "Points"

Our industry often seems to treat participants like children who can’t make big decisions—but a recent research paper suggests they might make better choices  if  we expanded their perspective. The paper, intriguingly titled “ Financial Wellness Meets Behavioral Economics ,” highlights a behavioral tendency known as “narrow framing”—basically a tendency to focus on one complex choice, or one element of a complex choice, at a time.  Now, at first blush this seems rational, and perhaps even prudent—but the paper suggests that this kind of linear thinking means that people are inclined to overlook real-life disruptions like financial emergencies—which are not only uncertain with regard to amount or timing, but even in terms of whether they will occur at all. Little wonder, therefore,  that  studies   routinely find that workers say they are ill prepared to come up with the funds to cover some kind of short-term emergency o...

A month ago, when we wrote about the 61 st  Annual Survey of Profit Sharing and 401(k) Plans from the Plan Sponsor Council of America (PSCA), there were several key points highlighted – but there are some interesting findings you might have overlooked. Perhaps the most significant finding of that survey – the longest running of its kind – was a record employer contribution rate (5.1% of pay) and a total savings rate in excess of 12%, the highest percentage ever recorded in the history of the survey. Also noteworthy was that nearly three-fourths (73.1%) of plans now retain an independent investment advisor to assist with fiduciary responsibilities – up from 69.5% in 2016. But here are some findings from the survey of plan sponsors that you might have missed. There’s less ‘waiting.’ Once upon a time, the norm was to have participants wait a year before letting them participate in the 401(k) plan. There was administrative logic in that decision – after all, tur...