The defined contribution industry has several major issues to address in the years to come.
David Ireland, senior managing director and the global head of defined contribution at State Street Global Advisors, stopped by ThinkAdvisor’s office recently to discuss two issues in particular that are on SSGA’s radar: access and coverage, and retirement income.
SSGA’s defined contribution investment only (DCIO) business has approximately 13 million participants and more than $400 billion in DC plan assets and $51 billion in target date assets.
Access and Coverage
SSGA continues to express the need to expand access and coverage to retirement plans.
More than 30 million full-time, full-year private sector American workers do not have access to a workplace retirement plan, according to research from The Pew Charitable Trusts.
Of the 58% of workers that have access to a workplace retirement plan, only about half of them participate in a plan.
“One of the things that’s core to our mission in our DC business is improving retirement outcomes … and we can do that in part through investment products,” Ireland told ThinkAdvisor. “But if they don’t have access to a plan, or the plan isn’t even in place, we can’t do anything for them. So we first have to get them access.”
One way SSGA has encouraged access is by supporting state-sponsored retirement plans.
Oregon – the first state to implement a state-sponsored auto-enrollment individual retirement account program – launched its OregonSaves retirement program in July of last year. And SSGA now manages the assets of OregonSaves.
Illinois, California, Connecticut and Maryland have similar programs in the works.
While SSGA is supportive of the states going at it on their own to try and solve this access and coverage issue, it also may not be the most effective pursuit.
“The state-based approach is a little bit ‘patchwork,’” Ireland explained. You’ve got Oregon going at it alone, you’ve got California [and] Illinois’ doing it … They’re all doing the right thing, but they’re not scaling. It’s not as efficient as it could be, it’s not as coordinated as it could be.”
SSGA’s preference would be to have “something that’s bigger,” like “some type of a federal plan that covers everyone,” Ireland said.