As the New Year is a time of
personal reflection, it can also be a time of reflection for defined
contribution (DC) plan sponsors.
Mercer provides recommendations for DC plan sponsors given current market conditions and challenges for the coming year.
is the only constant in today’s market. As such, it is crucial to
maintain vigilance over managing DC plans. Governance should always be a
key focus, but it’s not a silver bullet,” says Liana Magner, partner at
Mercer. “DC plans need to evolve with changes in legislation,
regulations, industry trends and the changing needs of individuals. What
may have been ideal a few years ago may not be as ideal today.”
plan design, Mercer suggests that DC plan sponsors should review their
participants’ behavior and assess if matching plan design is influencing
the choices being made by employees. Are these the correct influences?
How could the design be more effectively structured to influence the
In addition, DC plan design should be
evaluated regularly to ensure it is relevant for the participant base,
Mercer says. To do this, employers need to understand their
participants’ behavior, needs and priorities. Areas for review include:
cluster analysis; assessing participants’ financial courage; reviewing
how participants are using existing investment options and relative
retirement preparedness. Analyzing non-participants is crucial as well,
Mercer contends, so employers can better determine how they can get them to participate. NEXT: Investments and fees