A new survey finds some interesting differences in concerns and priorities between DB and DC plan sponsors.
Retirement benefit costs are a much greater concern for those managing both a DB (active, frozen or closed) and DC plan, as opposed to those managing only a DC plan. Thirty-three percent of sponsors with only a DC plan regard costs as a top risk, compared with 59% of those with active DC and DB plans, 53% of those with a DC plan and an inactive DB plan, and 49% of all respondents.
Vendor service quality is a higher concern for those that manage only a DC plan, with over a third (34%) in this group citing this issue as a key concern versus only 13% of sponsors with active DB and DC plans, and 22% of sponsors with a DC plan and an inactive DB plan.
Today, 58% of sponsors that have never offered a DB plan indicate that retirement readiness is their top risk, in contrast to 39% of all respondents to a survey of more than 300 plan sponsors by Willis Towers Watson.
Fifty-eight percent of sponsors with an open DB plan cite investment volatility as a top concern, while 52% of respondents that sponsor only a DC plan state investment volatility as a top risk.
For the DC-only employers, investment volatility is related to fluctuations in workers, DC account balances, which can lead to workforce exit issues, according to the report. Among those that sponsor a DB plan, volatility is related to fluctuations in their pension plan assets.
The most monitored aspects of DB plans include:
- plan asset allocation (82%);
- investment managers (80%); and
- investment goals and objectives (69%).
More than half monitor funded status (65%), as well as fees and expenses (53%), on a frequent basis. DB plan sponsors are less concerned with their plan documentation compliance relative to investment-related issues. Less than a third (31%) monitor this aspect of their plan frequently, 35% monitor it annually, and another 30% do so on an ad hoc basis.
DC plan sponsors monitor investment managers more than other aspects of their plan: 78% indicated that they monitor investment managers frequently; that is, quarterly or more often. These sponsors also reported monitoring participation rates (69%) and contribution rates (67%) frequently. More than half of DC plan sponsors say they monitor investment goals and objectives, participant asset allocation, and fees and expenses on a frequent basis.
The survey participants comprise over 300 retirement sponsors representing a range of industries, though most were larger plans. More than 4 out of 10 respondents had more than 10,000 participants, another 35% had more than 2,500, 14% had between 1,000 and 2,500, and just 7% had less than 1,000 participants.
