With employers nationally shaken by retirement plan losses, Prudential Financial Inc. is hoping a bundled package of products can help it draw assets from a skeptical marketplace.
Individually, the products are not new, but the Newark, N.J., insurance company hopes that by bundling them together it can attract assets.
The packaged retirement plan includes streamlined administration and lifetime income guarantees. The bundled product, called Redefining Retirement, is aimed at employers with 100 to 5,000 employees.
"The U.S. retirement system is in need of help," John Kalamarides, a senior vice president of retirement solutions with Prudential, said in an interview last week. "Traditional approaches haven't helped because they have been implemented piecemeal."
In a press release Kalamarides called the product "the beginning of a broader, long-term shift in the design, management and administration of retirement programs." Doug Dannemiller, a senior analyst at the research firm Aite Group, sounded skeptical, noting, as did Kalamarides, that the product's elements are not new in and of themselves. But Dannemiller said there may be market demand for it. "I challenge how innovative it is," he said, but, "to be a better mouse trap, you only have to be a little bit better."
Kalamarides, however, said the packaging of quality components is what matters. "You've probably never seen the elements all packaged together in a way that plan sponsors can adopt all of it at once," he said.
Prudential's product combines "autopilot" features such as automatic enrollment, automatic contribution escalation and automatic asset allocation with a guaranteed minimum withdrawal benefit product. The goal is to help ensure adequate savings and a guaranteed stream of income in retirement, according to Prudential.
The retirement income guarantee is one of the strengths of Prudential's retirement plan, Dannemiller said. "These guaranteed products are relatively new, and are definitely a good thing," he said.
But Dannemiller said the value of the product hinges on its costs. Kalamarides said employers would find the cost of the product 10% to 15% lower than the cost of buying the pieces individually.
Prudential is also touting the product's "additional levels of fiduciary risk support and enhanced levels of indemnification."
It adopted the best safe-harbor practices available, Kalamarides said. That includes Prudential's pledge to take responsibility if a sponsor that adopts the whole package is later sued successfully by a participant for having made an imprudent choice, he said.
The investments within Prudential's bundled product include qualified default alternatives, including Prudential's target-date funds. Participants have access to Prudential's subadvised options as well as access to retail mutual funds, the company said.
And Prudential is touting the inclusion within the product of its stable value offerings, which include guarantees. Stable-value funds are available in most 401(k) plans, and are an alternative to money market funds and bond funds. They are designed to shelter investors against losses while providing upside potential.
Prudential's product includes a plan designed to optimize employee participation through auto-enrollment and better contribution matches. An automatic contribution accelerator boosts savings, and the plan encourages continuous saving by discouraging loans. Costly inactive accounts are eliminated by allowing small balance rollovers, and participants' savings are maximized as the product helps them follow what Prudential calls "a thoughtful planning strategy." The product release comes amid concern about the defined contribution retirement plan model, in which responsibility has been shifted from employers to employees.
Kalamarides described Redefining Retirement as a way to ensure better outcomes for plan participants, lessen fiduciary risk and lighten the administrative burden for plan sponsors. Another selling point of the product is its streamlined processing, in which transactions are automated and certain administrative tasks are outsourced. Such tasks might include hardship loan evaluations and those related to qualified domestic relations orders, in which retirement plan assets are divided between divorcing couples, Kalamarides said.