Start-to-finish guidance toward building and implementing a robust DC plan
Successful Defined Contribution Investment Design offers a comprehensive guidebook for fiduciaries tasked with structuring and implementing a 401(k) or other defined contribution (DC) pension plan. More than a collection of the usual piecemeal information, this book seeks to offer a complete, contemporary framework for plan design, together with tested methodologies and analytic techniques to help streamline plan monitoring, management and improve participant outcomes. Examples from plan sponsors provide on-the-ground insight while suggestions from DC consultants add expert perspective. Views from ERISA expert counsel provide additional understanding--along with input from academic thought leaders. Finally, investment evaluation and analysis is joined with participant savings and asset allocation data to look prospectively at potential outcomes, and case studies illustrate real-world implementation of objective-aligned asset allocation such as custom target-date strategies. Though the focus is primarily on U.S. plan design, author perspectives from countries including Australia, the United Kingdom and Canada provide relevant and helpful viewpoints for both new and experienced plan fiduciaries.
For the vast majority of workers, DC plans have replaced traditional defined benefit pension plans as the primary source of employer-provided retirement income. This book provides comprehensive guidance to help you construct a plan to help workers to retire with confidence.
* Adopt a framework for DC evaluation and structure
* Learn new methodologies for investment choice evaluation
* Use the innovative PIMCO Retirement Income Cost Estimate--or PRICE--to help quantify the amount of money a worker needs to create and stay on track to building a real income stream in retirement
* Examine methodologies used at major companies in the U.S. and globally
DC plans are the most rapidly growing retirement market in the world, yet sources of consolidated structural and analytical guidance are lacking. Successful Defined Contribution Investment Design fills the gap with a comprehensive handbook that covers the bases to help you develop an objective-aligned defined contribution plan.
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978-1-119-30254-4 (9781119302544)
Schweitzer Klassifikation
Thema Klassifikation
DNB DDC Sachgruppen
Dewey Decimal Classfication (DDC)
BIC 2 Klassifikation
BISAC Klassifikation
Warengruppensystematik 2.0
Stacy L. Schaus is an executive vice president and leads PIMCO's Defined Contribution Practice working primarily with plan sponsors and consultants. Prior to joining PIMCO in 2006, she was a founder and president of Hewitt Financial Services, which offers DC investment consulting and research as well as brokerage and personal finance services. While at Hewitt, she co-created and launched the Aon Hewitt 401(k) Index(TM) to help evaluate how DC participants respond to market changes. She is the founding chair for the Defined Contribution Institutional Investment Association, serves on the executive committee of the Employee Benefit Research Institute, and served as a Financial Planning Association board member. She has 35 years of investment experience and holds an MBA from the Stern School of Business at New York University and an undergraduate degree from the University of California, Santa Barbara.
Ying Gao, who carried out the analytic reporting and modeling contained in this volume, is a vice president in the client analytics group in the Newport Beach office of PIMCO. Her primary areas of focus are financial modeling, asset allocation, and risk management. Prior to joining PIMCO in 2009, Dr. Gao worked with the fixed income portfolio management department at Principal Global Investors and the capital markets group at Federal Home Loan Bank of Des Moines. She has 10 years of investment experience and holds a PhD in economics from Iowa State University. She earned her master's and undergraduate degrees in finance from Zhejiang University in China.
1 - Successful Defined Contribution Investment Design [Seite 3]
2 - Disclosure [Seite 9]
3 - Contents [Seite 11]
4 - Acknowledgments [Seite 17]
5 - Introduction [Seite 21]
5.1 - How This Book Is Organized-and How to Use It [Seite 23]
5.2 - A Continuing Commitment to Meet the Need for Information [Seite 26]
5.3 - Why Should You Read This Book? [Seite 27]
6 - Part One DC Plans: A Cornerstone of Retirement [Seite 29]
6.1 - Chapter 1 DC Plans Today: An Overview of the Issues [Seite 31]
6.1.1 - Preface: A Career and a New Form of Pension Plan Are Born [Seite 31]
6.1.2 - DC Plans: Becoming the New Reality . . . No Turning Back [Seite 33]
6.1.3 - Setting Goals for Success: Income Replacement Targets [Seite 34]
6.1.4 - Reducing DC Litigation Risk: Process and Oversight [Seite 36]
6.1.5 - Who's a Fiduciary? [Seite 37]
6.1.6 - How to Approach Outsourcing DC Plan Resources [Seite 39]
6.1.7 - Hiring an Investment Consultant [Seite 40]
6.1.8 - Getting Started: Setting an Investment Philosophy and Governance Structure [Seite 40]
6.1.8.1 - Establish Global Philosophy and Guiding Principles [Seite 41]
6.1.8.2 - Set Retirement Plan Objectives and Design [Seite 42]
6.1.8.3 - Create Governance Oversight Structure [Seite 43]
6.1.8.4 - Formulate Objective Measures of Success [Seite 43]
6.1.8.5 - Outline Implementation Considerations [Seite 43]
6.1.9 - PIMCO Principles for DC Plan Success: Building and Preserving Purchasing Power [Seite 45]
6.1.10 - Maximizing DC Savings: Just Do It! [Seite 47]
6.1.11 - In Closing [Seite 52]
6.1.12 - Questions for Plan Fiduciaries [Seite 53]
6.2 - Chapter 2 Aligning DC Investment Design to Meet the PRICE of Retirement [Seite 55]
6.2.1 - Begin with the End in Mind [Seite 57]
6.2.2 - What Is a Reasonable Pay Replacement Target? [Seite 59]
6.2.3 - Calculating the Income Replacement Rates [Seite 62]
6.2.4 - Historic Cost of Retirement: PRICE Is a Moving Target [Seite 64]
6.2.5 - A Focus on Income, Not Cost [Seite 67]
6.2.6 - PRICE-Aware: Applying PRICE to Consider DC Assets and Target-Date Strategies [Seite 68]
6.2.7 - Evaluating Glide Paths [Seite 70]
6.2.8 - Tracking DC Account Balance Growth Relative to PRICE [Seite 74]
6.2.9 - Summary: The Importance of Knowing Your PRICE [Seite 75]
6.2.10 - In Closing [Seite 75]
6.2.11 - Questions for Plan Fiduciaries [Seite 76]
6.2.12 - Note [Seite 76]
6.3 - Chapter 3 Plan Investment Structure [Seite 77]
6.3.1 - Tiers and Blends: Investment Choices for DC Participants [Seite 80]
6.3.2 - Tier I: "Do-It-for-Me" Asset Allocation Investment Strategies [Seite 81]
6.3.2.1 - Target-Date Strategies [Seite 82]
6.3.2.2 - Balanced or Target-Risk Strategies [Seite 85]
6.3.2.3 - Managed Accounts [Seite 86]
6.3.3 - Tier II: "Help-Me-Do-It" Stand-Alone or "Core" Investment Options [Seite 87]
6.3.3.1 - DC Plan Investment Choices: Farewell to Company Stock? [Seite 91]
6.3.3.2 - Reduce Company Stock Exposure with "Sell More Tomorrow" [Seite 94]
6.3.3.3 - Evolution of Investment Menu Design [Seite 95]
6.3.3.4 - Active versus Passive Approaches: DC Consultants' Views [Seite 96]
6.3.3.5 - Active versus Passive: Reduced or Heightened Litigation Risk? [Seite 99]
6.3.3.6 - Investment Structure: Mutual Fund, Collective Investment Trust, or Separately Managed Account [Seite 102]
6.3.3.7 - Understand Revenue Sharing: Consider Paying Administration and Other Plan Fees [Seite 105]
6.3.3.8 - Blended Multimanager or White-Label Investment Options [Seite 107]
6.3.4 - Tier III: "Do-It-Myself" Mutual-Fund-Only or Full Brokerage Window [Seite 110]
6.3.5 - Considering an Outsourced Chief Investment Officer [Seite 111]
6.3.6 - Considering an Outsourced Chief Investment Officer [Seite 111]
6.3.7 - In Closing [Seite 113]
6.3.8 - Questions for Plan Fiduciaries [Seite 114]
6.3.9 - Notes [Seite 114]
6.4 - Chapter 4 Target-Date Designand Approaches [Seite 115]
6.4.1 - Target-Date Structures vary By plan Size [Seite 120]
6.4.2 - Custom Target-Date Strategies [Seite 121]
6.4.3 - Semicustom Target-Date [Seite 122]
6.4.4 - Packaged Target-Date [Seite 123]
6.4.5 - Target-Date Selection and Evaluation Criteria [Seite 124]
6.4.6 - No Such Thing as Passive [Seite 125]
6.4.7 - Low Cost and Low Tracking Error Does Not Equal Low Risk [Seite 126]
6.4.8 - Framework for Selecting and Evaluating Target-Date Strategies: Three Active Decisions Plan Sponsors Must Make [Seite 127]
6.4.9 - Active Decision #1: How Much Risk Can Plan Participants Take? [Seite 128]
6.4.9.1 - Human Capital May Not Be Sufficient: Understanding Risk Capacity versus Risk Tolerance [Seite 130]
6.4.10 - Active Decision #2: How Is the Risk Best Allocated across Investment Choices? [Seite 134]
6.4.11 - Active Decision #3: Should Risk Be Actively Hedged? [Seite 139]
6.4.12 - Tail-Risk Hedging Strategies [Seite 139]
6.4.13 - Insurance [Seite 140]
6.4.14 - Target-Date Analytics: Glide Path Analyzer (GPA) and Other Tools [Seite 140]
6.4.15 - Global DC Plans: Similar Destinations, Distinctly Different Paths [Seite 141]
6.4.16 - In Closing [Seite 143]
6.4.17 - Questions for Plan Fiduciaries [Seite 144]
6.4.18 - Notes [Seite 145]
7 - Part Two Building Robust Plans: Core Investment Offerings [Seite 147]
7.1 - Chapter 5 Capital Preservation Strategies [Seite 149]
7.1.1 - Capital Preservation: Importance [Seite 150]
7.1.2 - Capital Preservation: What Is Prevalent and What Is Preferred? [Seite 151]
7.1.3 - The $1 NAV : Shared by Stable Value and MMFs [Seite 152]
7.1.4 - Stable Value Offers More Opportunity in a Low-Interest-Rate Environment [Seite 155]
7.1.5 - Looking Forward: The Changing Role of Stable Value [Seite 158]
7.1.6 - Making Low-Risk Decisions: Views from the Field [Seite 160]
7.1.7 - White Labeling: A Capital Preservation Solution [Seite 163]
7.1.8 - An Analytic Evaluation of Capital Preservation Solutions [Seite 164]
7.1.9 - Short-Term, Low-Duration, and Low-Risk Bond Strategies [Seite 166]
7.1.10 - Inclusion of Stable Value in Custom Target-Date or Other Blended Strategies [Seite 169]
7.1.11 - In Closing [Seite 172]
7.1.12 - Questions for Plan Fiduciaries [Seite 172]
7.1.13 - Note [Seite 173]
7.2 - Chapter 6 Fixed-Income Strategies [Seite 175]
7.2.1 - What Are Bonds, and Why Are They Important for Retirement Investors? [Seite 177]
7.2.2 - What Are the Different Types of Bonds in the Market? [Seite 178]
7.2.3 - What Types of Bonds Should Be Offered to DC Participants? [Seite 181]
7.2.3.1 - Capital Preservation [Seite 183]
7.2.3.2 - Core and Core-Plus Bonds [Seite 184]
7.2.4 - Investment-Grade and High-Yield Credit [Seite 185]
7.2.4.1 - Multisector [Seite 186]
7.2.4.2 - Foreign/Global [Seite 186]
7.2.5 - Bond Investment Strategies: Passive versus Active Approaches [Seite 186]
7.2.5.1 - Bonds Unleashed [Seite 193]
7.2.6 - Analytic Evaluation: Comparing Bond Strategies [Seite 196]
7.2.7 - Fixed Income within Target-Date Glide Paths [Seite 198]
7.2.8 - Observations for Fixed Income Allocation within Target-Date Strategies [Seite 199]
7.2.9 - In Closing [Seite 201]
7.2.10 - Questions for Plan Fiduciaries [Seite 201]
7.3 - Chapter 7 Designing Balanced DC Menus: Considering Equity Options [Seite 203]
7.3.1 - What Are Equities and How Are They Presented in DC Investment Menus? [Seite 204]
7.3.2 - Getting the Most out of Equities [Seite 210]
7.3.3 - Consider Dividend-Paying Stocks [Seite 214]
7.3.4 - Evaluating Equity Strategies [Seite 214]
7.3.5 - Less Is More: Streamlining Equity Choices [Seite 217]
7.3.6 - Shift to Asset-Class Menu May Improve Retirement Outcomes [Seite 217]
7.3.7 - Active versus Passive-The Ongoing Debate [Seite 217]
7.3.8 - Strategic Beta: Consider Adding Fundamentally Weighted Equity Exposure [Seite 224]
7.3.9 - Currency Hedging: An active Decision [Seite 225]
7.3.10 - Observations for Equity Allocations within Target-Date Strategies [Seite 230]
7.3.11 - In Closing [Seite 232]
7.3.12 - Questions for Fiduciaries [Seite 232]
7.3.13 - Note [Seite 233]
7.4 - Chapter 8 Inflation Protection [Seite 235]
7.4.1 - What Is Inflation and How Is It Measured? [Seite 236]
7.4.2 - Why Inflation Protection in DC? [Seite 237]
7.4.3 - History of Inflation: Inflation Spikes Underscore Need for Inflation-Hedging Assets [Seite 238]
7.4.4 - Inflation Protection When Accumulating and Decumulating, and in Different Economic Environments [Seite 239]
7.4.5 - Economic Environments Change Unexpectedly-and Reward or Punish Various Asset Classes [Seite 241]
7.4.6 - Consultants Favor TIPS, Multi-Real-Asset Strategies, REITs, and Commodities [Seite 243]
7.4.7 - How Should Plan Sponsors Address Inflationrisk In DC Portfolios? [Seite 246]
7.4.8 - Implementation Challenges [Seite 248]
7.4.9 - Evaluating Real Asset Strategies [Seite 249]
7.4.10 - Summary Comparison of Individual and Multi-Real-Asset Blends [Seite 252]
7.4.11 - Inflation-Hedging Assets in Target-Date Glide Paths [Seite 255]
7.4.12 - Observations for Inflation-Hedging Assets in Target-Date Glide Paths [Seite 256]
7.4.13 - In Closing [Seite 258]
7.4.14 - Questions for Fiduciaries [Seite 258]
7.5 - Chapter 9 Additional Strategies and Alternatives: Seeking Diversification and Return [Seite 259]
7.5.1 - What Are Alternative Assets? [Seite 260]
7.5.2 - A Wider Lens on Alternatives [Seite 262]
7.5.3 - Consultant Support for Additional Strategies and Alternatives [Seite 264]
7.5.4 - Back to Basics: Why Consider alternatives? [Seite 267]
7.5.5 - Liquid Alternatives: Types and Selection Considerations [Seite 272]
7.5.6 - Important Characteristics in Selecting Alternatives: Consultant Views [Seite 276]
7.5.7 - Illiquid Alternatives: Types and Considerations [Seite 279]
7.5.8 - Contrasting Liquid Alternative Strategies with Hedge Fund and Private Equity Investments [Seite 281]
7.5.9 - In Closing [Seite 283]
7.5.10 - Questions for Plan Fiduciaries [Seite 284]
8 - Part Three Bringing It All Together: Creating Retirement Income [Seite 285]
8.1 - Chapter 10 Retirement Income: Considering Options for Plan Sponsors and Retirees [Seite 287]
8.1.1 - Advisor and Consultant Retirement Income Suggestions [Seite 288]
8.1.2 - Why Don't Retirees Leave Their Assets in DC Plans at Retirement? [Seite 292]
8.1.3 - Retaining a Relationship with Your Employer Inretirement: An Innovative and Caring Plan Sponsor [Seite 297]
8.1.4 - Mutual Benefits: Retaining Retiree Assets May Help Both Retirees and Plan Sponsors [Seite 299]
8.1.5 - Turning DC Assets into a Lifetime Paycheck: Evaluating the DC Investment Lineup for Retiree Readiness [Seite 300]
8.1.6 - Evaluating Portfolio Longevity [Seite 305]
8.1.7 - Turning Defined Contribution Assets into a Lifetime Income Stream: How to Evaluate Investment Choices for Retirees [Seite 306]
8.1.8 - Guarding Retiree Assets against a Sudden Market Downturn: Sequencing Risk [Seite 308]
8.1.9 - Ways to Manage Market and Longevity Risk . . . without Adding In-Plan Insurance Products [Seite 309]
8.1.10 - Living beyond 100: Planning for Longevity [Seite 310]
8.1.11 - Managing Longevity Risk: Considerations for Buying an Annuity [Seite 312]
8.1.12 - Immediate and Deferred Annuities: Why Out-of-Plan Makes Sense [Seite 312]
8.1.13 - In Closing [Seite 318]
8.1.14 - Questions for Plan Fiduciaries [Seite 318]
8.1.15 - Notes [Seite 319]
8.2 - Chapter 11 A Global View: The Best Ideas from around the Globe for Improving Plan Design [Seite 321]
8.2.1 - DC Plans: Becoming the Dominant Global Model [Seite 322]
8.2.2 - Retirement Plan Coverage and Participation [Seite 325]
8.2.3 - Investment Default and Growth of Target-Date Strategies [Seite 335]
8.2.4 - Retirement Income: The Global Search for Solutions [Seite 339]
8.2.5 - Defined Ambition in the Netherlands [Seite 341]
8.2.6 - New Solutions in Australia and Beyond: Tontines and Group Self-Annuitization [Seite 343]
8.2.7 - "Getting DC Right": Lessons Learned in Chapters 1 through 10 [Seite 346]
8.2.7.1 - Chapter 1: DC Plans Today [Seite 346]
8.2.7.2 - Chapter 2: Aligning DC Investment Design to Meet the PRICE of Retirement [Seite 347]
8.2.7.3 - Chapter 3: Plan Investment Structure [Seite 347]
8.2.7.4 - Chapter 4: Target Date Design and Approaches [Seite 348]
8.2.7.5 - Chapter 5: Capital Preservation Strategies [Seite 349]
8.2.7.6 - Chapter 6: Fixed Income Strategies [Seite 349]
8.2.7.7 - Chapter 7: Designing Balanced DC Menus: Considering Equity Options [Seite 350]
8.2.7.8 - Chapter 8: Inflation Protection [Seite 351]
8.2.7.9 - Chapter 9: Additional Strategies and Alternatives: Seeking Diversification and Return [Seite 352]
8.2.7.10 - Chapter 10: Retirement Income: Considering Options for Plan Sponsors and Retirees [Seite 352]
8.2.8 - Analytic Factors to Consider: Summary by Asset Pillar [Seite 353]
8.2.9 - In Closing [Seite 353]
8.2.10 - Note [Seite 355]
8.3 - Closing Comments [Seite 357]
8.3.1 - Priority 1: Increasing Plan Coverage and Individual Savings Rates [Seite 358]
8.3.2 - Priority 2: Moving to Objective-Aligned Investment Approaches [Seite 358]
8.3.3 - Priority 3: Broadening Options for Retirement Income [Seite 361]
8.3.4 - Nudging One Another along a Path to Success [Seite 361]
9 - Index [Seite 363]
10 - EULA [Seite 383]
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