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Retirement Perspectives


Stephen Dopp explains how the DOL fiduciary rule could affect 401(k) plan participants and investment menus.


Video: DOL Rule Impact on 401(k) Investment Menus

Welcome to Lord Abbett’s Defined Contribution Brief

DOL Rule Impact on 401(k) Investment Menus

Stephen Dopp, CIMA®, AIF®
Director, Defined Contribution

Stephen Dopp: There’s been a lot written about the new Department of Labor fiduciary rule and the potential impact that it could have on broker dealers and asset managers and record keepers. But I don’t think there’s been enough emphasis, really, on how it could impact 401(k) plan participants and investment menus in general.

Participants May Stick Around

Stephen Dopp: Well, the DOL has made it clear that they’re really trying to keep money inside of 401(k) plans for various reasons; the institutional pricing, different fiduciary governance inside of the 401(k) plan. But as these policies start to take hold, what it’s going to create is an environment where plan participants are going to use their 401(k) plan for things like capital preservation and even-distribution in retirement, whereas in the past it was primarily used as an accumulation vehicle. So plan menus must evolve to try to accommodate to this changing demographic inside of the 401(k) plans.

Chart 1: 401(k): Traditional Asset Options May Not Serve “De-Riskers”
Average number of traditional asset-class options in defined contribution plans in 2013 (latest available data)
[Bar chart starts with Bar 1 (Equity) and Bar 2 (Fixed Income) at the same level (chart midpoint), then animates to show big discrepancy in the two categories – 13 options in equities vs. only 3 for fixed income.]

Chart 2: 401(k): How Plan Lineups Might Evolve
[Animation displays Bar 1 remaining in place, Bar 2 rising, then fades before showing a final number for Bar 2]

Stephen Dopp: And if you think about this evolution of the plan demographic inside of a 401(k) plan, there may be more of an appetite to de-risk as participants get closer to, and even through, retirement. For this reason, you might want to look at different asset classes like high-yield or global fixed-income, or ways that a participant can slowly de-risk away from the equity markets, where traditionally you wouldn’t find those types of asset classes as stand-alones inside of a 401(k) plan. There may be an appetite in future for those types of products.

Summing Up

Stephen Dopp: In summary, the DOL rule could cause participants to stick around a lot longer than they originally expected. Because of this, plan sponsors must take into account this new reality. And this new reality could create situations where you need to incorporate different types of products to address key risks that they now face in retirement.

This has been Lord Abbett’s Defined Contribution Brief. Thank you for watching.

Visit our Defined Contribution Resources page at

[Links to:]


For all charts presented herein: The historical data are for illustrative purposes only, and do not represent any specific investment.

Chart 1: 401(k): Traditional Options May Not Serve ‘De-Riskers'
Source: BrightScope and ICI as of December 31, 2013 (latest available data). Figures for equity and fixed-income represent average number of investment options in each category in U.S. 401(k) plans as determined by BrightScope and ICI.

Chart 2: 401(k): How Plan Lineups Might Evolve
Source: Lord Abbett. The chart depicts in general terms how U.S. 401(k) plan lineups might change over time to reflect a greater average number of fixed-income investment options.

401(k) is a qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on an aftertax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit sharing feature to the plan. Earnings accrue on a tax-deferred basis.

This broadcast serves as reference material for information purposes only; does not constitute an offer to acquire, solicitation for an offer to acquire, an offer to sell or solicitation for an offer to buy, any securities, nor is intended to be relied upon as a forecast, research, or investment advice on any securities, and cannot be used for any of the foregoing.
The views and opinions expressed by the Lord Abbett speaker are those of the speaker as of the date of the broadcast, and do not necessarily represent the views of the firm as a whole. Any such views are subject to change at any time based upon market or other conditions and Lord Abbett disclaims any responsibility to update such views. Neither Lord Abbett nor the Lord Abbett speaker can be responsible for any direct or incidental loss incurred by applying any of the information offered.

This broadcast is the copyright© 2016 of Lord, Abbett & Co. LLC. All Rights Reserved. This recording may not be reproduced in whole or in part or any form without the permission of Lord Abbett.



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