Part 3: Streamlining investment decision-making - J.P. Morgan Asset Management

Part 3: Streamlining investment decision-making

Contributors Catherine Peterson, Anne Lester

Our latest survey reveals that, although participants are making progress and gaining confidence overall, more work is needed. In a series of three articles, we discuss our findings and the steps plan sponsors can take to further strengthen their plans.


As seen in Part 1 of our series, 2018 Defined Contribution (DC) Plan Participant Survey Findings, less than 40% of participants are highly confident in their ability to make key investment decisions and many are not fully engaged in monitoring their 401(k) accounts.1 In fact, the majority want the help of an expert in managing retirement assets, but most still stop short of wanting employers to choose their investments for them (EXHIBIT 1).

We saw in Part 2 that strategies to improve savings rates need to provide the right balance between employer encouragement and participant choice. A similar statement can be made about this article’s focus—strategies designed to streamline investment decision-making (such as target date funds [TDFs] and re-enrollment). Streamlining need not mean taking ultimate control of investment decision-making out of participants’ hands.

TDFs have gained popularity among participants and are the qualified default investment alternative (QDIA) of choice among plan sponsors. Using QDIAs such as TDFs in conjunction with automatic enrollment and re-enrollment strategies has the potential to motivate saving and simplify investing—for both new and existing participants.

Yet re-enrollment has had a slower uptake among plan sponsors, despite participants’ generally favorable views and high levels of satisfaction with these strategies. We look at participants’ perspectives alongside those of plan sponsors and examine possible misperceptions that may be tempering the adoption of these strategies.

Many want the help of an expert in managing their 401(k) investments


NNote: 2016 Total n=1,001; 2018 Total n=1,295.
Source: J.P. Morgan Plan Participant Research 2016, 2018.


Target date funds are designed to streamline investing for participants without the time, talent or inclination to manage their own investments. What’s more, the professionally managed glide path strategies underlying TDFs guide the allocation of assets over time, adjusting toward a more conservative asset mix as the participant approaches his or her retirement date. (Note that the principal value of the fund(s) is not guaranteed at any time, including at the target date).

TDFs are highly valued by participants: 88% find them appealing and, among those who say their employer offers TDFs, 71% are invested in them. These strategies are perhaps best suited for those lacking confidence in their investing knowledge: Among “do it for me” investors, 93% find them appealing and, when they are available in the plan, 81% invest in them. But even among “do it yourself” investors, 81% find TDFs appealing and, if they are offered in the plan, 54% invest in them (EXHIBIT 2).

Even “do it yourself” investors find TDFs appealing, and over half invest in them when they are offered in the plan

Note: 2018 Total n=1295; “do it for me” investors n=773; “do it yourself” investors n= 522.
*Of those invested in TDFs if offered in plan, total n=635; “do it for me” investors n=397; “do it yourself” investors n=238.
Source: J.P. Morgan Plan Participant Research 2018.


The ability to use QDIAs, such as target date funds, in conjunction with automatic enrollment can help plan sponsors proactively place new employees on a strong saving and investing path. But what about the generally much larger number of existing participants, some with sizable account balances, who may also lack confidence in their investing know-how, suffer from inertia … and fail to monitor and adjust the allocation of their retirement assets on a regular basis?

Defining re-enrollment

Some employers believe that all participants in their company’s 401(k) plan should review and reaffirm their investment selections periodically to ensure they are still appropriate. In these cases, in a process known as re-enrollment, employers notify participants that their existing account balances and future contributions will be defaulted into the plan’s QDIA (for example, into a TDF) unless the participant takes action by opting out and selecting a different investment option during a specified time period. Before conducting a re-enrollment, a plan sponsor must engage in a prudent process for determining whether a re-enrollment is appropriate for the plan and its participants.

Our research indicates that re-enrollment into a QDIA can be an effective process for getting participants to review and potentially improve their asset allocation, as well as simplifying the process for keeping that allocation strategically aligned with their retirement goals. In fact, despite the large majority of participants who find target date funds somewhat or very appealing, when TDFs are simply added to investment lineups, only about 1% to 4% of plan assets end up in these strategies. But when plan sponsors conduct a re-enrollment, the TDF share of plan assets is a much larger 49% to 97%.3 This is another illustration of inertia at work. Simply given the option to invest in TDFs, most participants do nothing, but when defaulted into these strategies, few opt out.

Potential misperceptions?

Conducting a re-enrollment is a concrete action that plan sponsors can take, aimed at improving the retirement outcomes of a large share of plan participants. Yet only 14% of plan sponsors (and 19% of large plans) have taken this step (or said they plan to do so in the next 18 months)—well below the implementation rates for automatic enrollment (64%) and automatic contribution escalation (50%).4 We believe this modest uptake may be attributable in part to a few misperceptions on the part of plan sponsors, for example:

Fear of employee pushback was the most frequently cited reason for not conducting a re-enrollment among the 87% of plan sponsors who have not yet done so,5 yet:

  • 86% of participants (90% of “do it for me” investors and 79% of “do it yourselfers”) are in favor of or at least neutral toward these strategies
  • 83% of participants who went through a re-enrollment with a TDF as the QDIA allowed their assets to be moved
  • 99% of those who allowed their assets to be moved are satisfied

Comfort with their plan’s overall asset allocation was the second most frequent reason: 56% of plan sponsors are highly (very or extremely) confident that participants are appropriately allocated,6 but:

  • Only 34% of participants are highly confident in selecting plan investment options, and …
  • Only 39% are highly confident about how to adjust the way plan assets are invested as they approach retirement7
  • Nearly three-quarters (73%) of self-allocating participants fall outside the range of equity exposure generally considered appropriate for their age8

Other plan sponsors said they had not conducted a re-enrollment because they were unaware of or didn’t know enough about it, they think it would involve too much work or they are concerned about fiduciary risks. Plan sponsors and their advisors/consultants should keep in mind that:

  • Conducting a re-enrollment can be more complex than incorporating automatic design features—but re-enrollment has the potential to more quickly impact the asset allocation of a larger percentage of participants, with a larger percentage of plan assets in their accounts.
  • In fact, ERISA safe harbor protection may be available for assets re-enrolled into a QDIA.

Re-enrollment and automatic plan features, implemented with QDIAs such as target date funds, have the potential to positively impact retirement saving and investing for new and existing participants alike. Of course, every plan is different and the appropriate combination of strategies will vary. In considering approaches for strengthening their defined contribution plans, it is important for plan sponsors to understand their participants’ level of saving and investing know-how, and to be aware of their attitudes and behaviors. Being informed about the latest strategies and the fiduciary protections available to support their adoption is also critical. Working closely with their regulators, providers and advisors/consultants, plan sponsors can continue to strengthen their plans and help more participants turn their retirement resolutions into reality.

Explore the key findings


To stay in tune with the knowledge, behavior and attitudes of 401(k) plan participants with respect to saving and investing for retirement, we undertook our fifth participant research study on this topic. From January 5 through January 15, 2018, we partnered with Mathew Greenwald & Associates, a market research firm based in Washington, D.C., to conduct an online survey of 1,295 defined contribution plan participants. In order to qualify for the study, each respondent had to be employed full-time at a for-profit organization with at least 50 employees, be at least 18 years old and have contributed to a 401(k) plan in the past 12 months.

Survey results have been weighted by age, gender and education to reflect the overall makeup of the general population of 401(k) plan participants. In a similarly sized, random sample survey of general population respondents, the margin of error (at the 95% confidence level) for the total population in this study would be plus or minus approximately 2.8 percentage points.

12018 DC Plan Participant Survey Findings—Part 1: Understand the state of the participant..
2See 2018 DC Plan Participant Survey Findings—Part 1 for definitions of “do it for me” and “do it yourself” investors.
3J.P. Morgan retirement research 2017.
4J.P. Morgan Plan Sponsor Research 2017.
72018 DC Plan Participant Survey Findings—Part 1: Understand the state of the participant.
8J.P. Morgan retirement research. Representative sampling of 3,000 self- allocating participants; appropriate equity exposures defined as within a 10% range over or under the J.P. Morgan target date glide path. Data as of December 31, 2017.


This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, you should seek individualized advice from your personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of your own situation.

TARGET DATE FUNDS. Target date funds are funds with the target date being the approximate date when investors plan to start withdrawing their money. Generally, the asset allocation of each fund will change on an annual basis with the asset allocation becoming more conservative as the fund nears the target retirement date. The principal value of the fund(s) is not guaranteed at any time, including at the target date.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve.

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