A new survey finds some notable gaps between the concerns weighing on plan sponsors and those on the minds of non-plan sponsor industry professionals.
Plan sponsors are worried about participants’ participation rates and savings rates (49%), as well as the changing regulatory landscape (31%) and overall plan administration burdens (30%), with litigation potential (28%) close behind. Consequently, according to the Rocaton/Pensions & Investments 2015 Survey of Defined Contribution Viewpoints, over the next 12 months, plan sponsors believe the most important priorities to be improving participant communications, addressing fees and enhancing or implementing auto features.
Industry professionals, on the other hand, are concerned about retirement adequacy across the system (63%), continued pressure on fees (50%) and the impact of new regulations (50%). Industry professionals are, therefore, focused on trying to develop new products in the areas of retirement income solutions (62%), custom target date solutions (48%) and other multi-asset options (45%). While industry professionals are very focused on continued pressure on fees (at 50%, the second most popular answer), only 19% of plan sponsors indicated fees are keeping them up at night.
The survey responses were drawn from more than 400 defined contribution plan sponsors and industry professionals at asset management, recordkeeping and consulting firms.
If You Could Change One Thing…
Asked if they could change one thing about their DC plans in general, the most popular answer for plan sponsors (24%) — as it was for industry professionals (28%) — was to include a retirement income solution. Not surprisingly, as for the one piece of DC regulation needed, both groups (21% of plan sponsors and 23% of industry professionals) selected a comprehensive safe harbor for an in-plan retirement income solution as their top response (“introduce/enhance auto features” was the #2 choice of both groups, cited by 21% of each).
However, measures to provide additional protections from fiduciary lawsuits was nearly as popular among plan sponsors, cited by 20%.
The order of the top three most popular retirement income options currently utilized among plan sponsors is exactly the same order and similar percentages as in Rocaton’s 2012 DC Survey of Plan Sponsors. However, the most common option — by a huge margin — was educational or planning tools focused specifically on retirement income. How huge a margin? Three-quarters of survey respondents cited it as a current option, with the second most common, a distant 25%, reserved for “managed account services with a specific focus on nonguaranteed income (in-plan).” The third most common? The 18% who said they had “none.”
While industry professionals had similar percentages as plan sponsors when it comes to planning tools and managed account services, they had a higher regard for access to annuities (over 10% higher), asset allocation options with guarantees (10% higher) and deferred/longevity annuities (over 10% higher).
Future Views
Their future view wasn’t much different. Education topped the list of future considerations for plan sponsors (71%) and industry professionals (71%), well ahead of the 41% of plan sponsors that cited an “asset allocation option with a guaranteed income or annuity component” and the 35% that cited “access to immediate and/or deferred annuities outside of your plan (such as an annuity window).” Additionally:
- 68% are waiting for clearer fiduciary protection from the Labor Department
- 36% are waiting for products to mature and gain broader adoption
- 26% say they’re too expensive
- 21% don’t want to keep retirees in the plan
- 12% see possible single insurer risk
- 12% see a lack of portability for participants
- 10% are moving their retirement income solution from one provider to another
- 7% see difficulty in changing from one retirement income provider to another
That said, 75% of plan sponsors said they would be more likely to offer an in-plan asset allocation option with a guaranteed income or annuity component if the DOL issued clearer protection. Nearly half (47%) of plan sponsors said that regulatory developments and guidance from the IRS and DOL in 2014 had not changed their opinion on the topic of retirement income, while 42% said it had influenced their view, though they wanted to see something more specific. Just 3% said they now had a more favorable view, while 8% were unaware there were regulatory developments to consider.
