Nationwide is accelerating the adoption of next-generation automatic plan features by allowing plan sponsors to automatically default participants into an in-plan protected retirement solution, according to an April 24 announcement by the firm.
While many employers are familiar with setting a default investment for participants, Nationwide's Dynamic Default will allow employer plan sponsors to select multiple default investment options based on age.
Nationwide notes that this new default option builds on the firm’s launch in 2020 of a suite of in-plan protected retirement solutions to help plan participants convert their savings into protected income.
The Dynamic Default feature begins when a participant enrolls in the plan, either on their own or through auto-enrollment. If the participant fails to select their own investment, they will be placed into an initial default fund and their assets will remain there unless they take action.
As participants near retirement (around age 50, for example), they will transition from the initial default fund—likely an investment primarily focused on growth opportunity—to a second default investment, like a protected retirement-income option.
The firm adds that, in the past year, use of its in-plan protected retirement solutions has skyrocketed. As of the end of the first quarter of 2024, 6,931 plans offered such options supported by Nationwide with $4.95 billion in assets under management (AUM) for 64,372 participants who have adopted a protected retirement investment option. That's up from 1,042 plans, $1.14 billion in AUM and 52,314 participants from just one year ago (the announcement shows that these figures include assets from a recordkeeper and insurer perspective).
Much of this growth is being driven by plan sponsors that choose to offer an in-plan protected retirement option as a default fund for participants.
“We're really starting to see a lot more employers become more comfortable offering protected retirement solutions, and we believe offering them through dynamic default will be the next generation of retirement plan auto features,” noted Eric Stevenson, President of Nationwide Retirement Solutions. “The key is not just making these solutions available, but making them automatic for employees who don't know where to start,” he adds.
To that end, a 2023 Nationwide Retirement Institute survey found nearly three-fourths (73%) of employees ages 45 and older who participate in 401(k) plans wish they were offered a pension-like income stream within their employer-sponsored plan.
When asked what would most increase their confidence in their retirement plan and financial investments, more than half (55%) of respondents indicated “guaranteed income options.” In addition, 87% of these respondents said they would be, at least, somewhat likely to rollover their retirement savings into a guaranteed lifetime income investment option if they had the ability.
“We know that investing for the long-term means managing longevity and market risk, and retirement plan participants want more help from their employers—particularly as they get closer to retirement,” explained Cathy Marasco, leader of Nationwide's Protected Retirement team. “While defaulting new participants into an investment option upon enrollment is a great first step, there is no one-size-fits all solution, so it makes sense that participants may need to transition to a different type of investment as they age and face the risks of market volatility or outliving their retirement income.”
