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Prudential Retirement Unveils Approach for Reinventing the Defined Contribution Plan.

NEWARK, N.J. -- By simplifying plan design, using the best elements of the traditional defined benefit model, educating participants on generating retirement income, and delivering retirement-income solutions, plan sponsors can help dramatically improve retirement outcomes for their employees, according to a Prudential Retirement white paper report released today. Prudential Retirement is a business of Prudential Financial, Inc. (NYSE: PRU).

The report recommends reinventing today's 401(k) and other forms of defined contribution plans by drawing from lessons learned from behavioral finance, risk management and defined benefit fundamentals to help ensure that modern American workers have a better opportunity to achieve a secure retirement. "Defined contribution plans are extremely popular with American workers, most of whom use them as their primary retirement-savings vehicle. Despite this popularity, however, most workers are not saving enough or investing wisely, and many are increasingly at risk of not being able to achieve a worry-free retirement. We can and must do a better job of helping them," said John Kim, president, Prudential Retirement.

Entitled Reinventing the Defined Contribution Plan: Research, Analysis and Recommendations, the report reflects the thought leadership of Prudential Retirement's Secure Retirement Advisory Group, comprised of Prudential executives, retirement industry experts, and academic leaders. The report also outlines a set of core strategies that plan sponsors and providers can use to meaningfully improve the odds that defined contribution plan participants will achieve better outcomes from their plans:

--Plan Design - Use plan design defaults - including automatic enrollment and contribution escalation -- that harness inertia and other natural participant behaviors and leverage lessons from research in behavioral finance;

--Leverage Best Defined Benefit Features - Incorporate the best elements of traditional defined benefit pension plans -- such as automatic enrollment, professional asset allocation and a focus on retirement income -- into the defined contribution model;

--Asset Allocation - Recognizing that asset allocation has been shown to be as important as fund selection in achieving retirement security, offer automatically adjusted asset-allocation investment options - such as lifestyle and target maturity funds - and provide easy-to-use asset allocation tools, such as Prudential's GoalMaker, that can help participants build well-balanced portfolios;

--Plan Management - Encourage comprehensive retirement planning that addresses accumulation needs and is based on helping to ensure adequate retirement income, and;

--Lifetime Income - Include distribution options in plan design - such as income annuities - that deliver a guaranteed stream of retirement income.

"The approach we've outlined gives plan participants a better platform for not only growing retirement account values, but also for generating a guaranteed paycheck during retirement," said Scott Sleyster, executive vice president at Prudential Retirement, principal architect of Prudential's Secure Retirement(sm) approach and co-author of the white paper. "By implementing these recommendations, we believe plan sponsors can help improve the retirement planning and, most importantly, results of plan participants for many years to come."

Outside members of Prudential's Secure Retirement Advisory Group include: Mark Iwry, non-resident, senior fellow, Brookings Institution; Brigitte Madrian, professor, Wharton School; Don Phillips, managing director, Morningstar; Charlie Ruffel, CEO of Asset International, parent of Plan Sponsor Magazine; Dallas Salisbury, president & CEO, Employee Benefits Research Institute (EBRI); and Jack VanDerhei, Temple University and EBRI fellow. The group meets bi-annually to discuss research, trends and ideas. * For a copy of the complete report, visit

Prudential Retirement delivers retirement plan solutions for public, private, and non-profit organizations. Services include state-of-the-art record keeping, administration, investment management, comprehensive employee investment education and communications, and trustee services. With over 80 years of retirement experience, Prudential Retirement meets the needs of two million defined contribution participants and more than one million defined benefit participants and annuitants. Prudential Retirement has more than $136 billion in retirement account values as of December 31, 2005.

Prudential Financial companies, with approximately $532 billion in total assets under management as of December 31, 2005, serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the United States. These companies offer a variety of products and services, including life insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises and relocation services. For more information, visit

* Conclusions presented in the white paper are those of Prudential and should not be attributed to individual members of the Secure Retirement Advisory Group.
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Publication:Business Wire
Article Type:Company Profile
Date:Feb 22, 2006
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