It’s no secret that DB plans generally outperform DC plans, but the gap in 2011 was striking — almost 3% — according to a study by Towers Watson. DB plans have outperformed DC plans in 13 of the last 17 years, leading over that period by an average of 76 BPs.
There are clear benefits to DB plans, including:
• Better results
• Lower fees
• Longer time horizons with pooled accounts
• Professional management
As a result, DC plans have tried to become more like DB plans — with auto enrollment, escalation and more money in managed investments like TDFs. With DC plans becoming more attractive to employers these days and a return to DB for all but the smaller companies unlikely, it’s essential that plan sponsors get engaged to help their employees — through better plan design and giving participants access to professional money management and experienced plan advisors.
