March 27, 2014

Why are plan sponsors choosing a more paternalistic structure for their retirement plans?

Arnerich Massena’s latest white paper, The Paternalization of Participant-Directed Plans, examines this question. Research of participant investment behavior suggests that poor investment choices may be a significant factor in retirement saving shortfalls.

One solution to this problem is the “paternalization” of retirement plans, whereby plans are structured in such a way that participants don’t have to make investment selections unless they choose to. “Studies show that participants are finding themselves overwhelmed by the investment decision-making required of them and failing to achieve their retirement goals,” says Scott Dunbar, senior managing director. “Paternalization is about benevolent guidance, not about dictating or eliminating choices. We want to help plan sponsors better understand how to improve participants’ long-term investment outcomes, and paternalization is a step along that path.”

The white paper reviews the research and discusses some of the solutions. To read or download The Paternalization of Participant-Directed Plans, click here.