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Rating:BlackRock Lays Groundwork for Reg Reform Around RI Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, May 18, 2011

BlackRock Lays Groundwork for Reg Reform Around RI

Reported by Sean Hanna, Editor in Chief

BlackRock [see profile] played "meet the press" Wednesday morning at its annual Defined Contribution media briefing, talking up the coming need for retirement income solutions as the Baby Boom generation heads to retirement. The third-time event is hosted by Chip Castille, who heads BlackRock's US & Canada Defined Contribution Group, and was held in the firm's Manhattan offices.

Castille is using the event to unveil BlackRock's "2011 Defined Contribution Survey" results. This is the third year that the asset manager has partnered with Warren Cormier's Boston Research Group to survey the market.

This year, the survey included both employer and employee views. In past years the survey covered only plan participants. It also included questions about how much each of the two parties feels responsibility for the success of each individual's retirement success. And the survey posed questions about the role of retirement income and whether employers feel comfortable offering income solutions.

The briefing included two dozen reporters from both the trade press and business news services.

Castille told reporters that defined contribution plans are the "last best stand of private funded retirement," asking "what do we have left to replace the 401(k) system" if it fails.

The early boomers are going to push the system, bringing pressure and a challenge to the system, claimed Castille. A key area, he said, will be retirement income. That is an area where many participants feel uncomfortable and are seeking help.

Yet, BlackRock's survey shows that many plan sponsors believe that they are barred or prohibited from providing this help. That opens the door for another moment such as the one last decade that opened the door to the Pension Preservation Act's provisions on auto-plans.

Castille sees parallels between the PPA moment and the current opportunity press for change around retirement income. In each case, the market place has already developed potential solutions to the problem. Meanwhile, plan sponsors are reluctant to adopt those solutions due to unclear, vague or conflicting rules.

"We know that plan sponsors feel a great deal of responsibility, but they don't believe they are allowed to close this gap," said Castille. "The danger is that we see the DC system is something that can't work when what we need is to get the sponsors to get the ball rolling."

BlackRock's own solution to the problem is to offer income annuities inside of plans. Castille admits that the response to the product from plan sponsors so far has been "underwhelming." Less than a quarter of plan sponsors (23.7 percent) told BlackRock that they have decided to offer support or investment options for retirement income.

Castille said that BlackRock is challenging plan sponsors to move the ball and become early adopters to the annuity concept. In the world of ERISA that is a sales pitch that often takes years -- and laws -- to close.  

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