Defined contribution plan sponsors are not just interested in boosting participation and savings rates. There is an overwhelming push to “overcome obstacles, tap new methods, and simplify approaches in an effort to help participants tackle their future retirement income needs,” as stated in the Deloitte 2017 Defined Contribution Benchmarking Survey report.1
Employers are working towards this goal by listening to participant feedback and implementing a wide variety of plan design features and technologies. Sponsors are often paying attention to behavioral finance research pioneered by Nobel Prize winners Robert Shiller and Richard Thaler in an effort to get employees more engaged with their retirement plans and guide them in making better decisions.1
From the Callan 2019 Defined Contribution Trends Survey2
- 85% of DC plans surveyed offer a Roth feature—an increase from 68% in 2016.
- 22% of employers made a change to their company match policy, with 33% of those employers increasing the match rate— a significant increase from 2017.
- 87% of plans offer target date funds and 75% use collective trusts in their fund lineups.
Investment and retirement planning education
Sponsors continue to refine their retirement benefits communication strategy. To maximize value, many are tailoring content based on employees’ specific circumstances and demographics. The Deloitte Defined Contribution Benchmarking Survey reported that 65 percent of sponsors are now targeting messages based on demographics. The survey also found that 74% of these targeted communications are to encourage participants to increase savings with 54% directed at investment and financial market education.1
Investment advisory services
The vast majority of DC plans (84.4%) offer some type of investment advice or guidance which helps employees improve their retirement readiness.2
More plans (74.1%) are offering online investment advice than in previous years.2 Online advice can help to lower fees compared to costs associated with face-to-face or telephone advice options. Online “robo” services are expected to appeal to tech savvy millennials who may be more amenable to using an app for advice versus direct communication with an advisor.4
Financial advisory service
Nearly two-thirds of employers say they will take steps to focus on the financial well-being of their employees in ways that go beyond retirement savings, according to a 2019 survey by Alight Solutions.5 The most common topics covered by financial wellness programs include long-term retirement savings needs, investing basics, budgeting, financial planning, debt management, and health care planning.
1 Source: 2017 Deloitte Defined Contribution Benchmarking Survey, https://www2.deloitte.com/us/en/pages/human-capital/articles/annual-defined-contribution-benchmarking-survey.html
2 Source: Callan Institute, 2019 Defined Contribution Trends Survey, https://www.callan.com/wp-content/uploads/2019/01/Callan-2019-DC-Trends-Survey.pdf
3 Source: Pensions & Investments, originally posted December 10, 2018, https://www.pionline.com/article/20181210/PRINT/181219919/experts-optimistic-over-auto-portability-proposal
4 Source: PlanPILOT, originally posted June 1, 2018, http://planpilot.com/defined-contribution-plan-trends-that-plan-sponsors-need-to-know/
5 Source: Alight Solutions, 2019 Hot Topics in Retirement and Financial Wellbeing, https://ideas.alight.com/industry-reports/2019-hot-topics-report