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DC Plans Anticipate a Return to Normal in 2021

Industry Trends and Research

After prioritizing COVID-related initiatives in 2020, a new survey finds that many defined contribution plan sponsors expect to return to their pre-pandemic priorities.  

The results of NEPC’s Defined Contribution COVID Impact Poll reveal that nearly half of all respondents expect a return to “business as usual” this year, while discussions centered around plan innovation will likely play an increasing role, with many respondents planning to review financial wellness tools and consider retirement income solutions. 

“The pandemic and CARES Act changed the landscape and plan sponsors worked overtime for their participants last year,” notes Ross Bremen, Partner at NEPC and member of the firm’s Defined Contribution Practice Group. “There’s a more optimistic view of 2021, with the majority of respondents planning to get back to ‘business as usual.’ Topics that were hot prior to COVID—financial wellness tools and lifetime income—are back on the docket,” he says.  

The survey, which covers the pandemic’s impact on plan sponsor priorities for 2021, is a follow-up to the firm’s 2020 Defined Contribution COVID Impact Poll. The new poll is comprised of 75 DC plan sponsors, with respondents primarily from public (19%), health care (20%) and corporate (52%) organizations.

While many respondents say that it is business as usual (40%) for them when it comes to plan investment priorities for the remainder of 2021, others are considering:

  • retirement income solutions (33%);
  • the role of active/passive offerings within the program (19%);
  • adding additional investment choices (16%);
  • the role of growth/value offerings within the program (16%);
  • the performance and/or appropriateness of the QDIA (15%);
  • the removal of existing investment choices (13%); and 
  • adding ESG offerings for the program (5%). 

(Note that respondents were asked to select all that apply.) 

As to overall plan priorities for the remainder of 2021, most respondents indicated that they plan to review participant communication and messaging (53%), as well as review:

  • financial wellness tools (40%);
  • recordkeeping fees (33%);
  • advice offerings (24%);
  • cybersecurity practices and fraud indemnifications (20%);
  • auto features (17%); and
  • plan distribution rules (12%). 

Overall, the pandemic appears to have had little impact on plan cutbacks, but health care plans appear to have been the most affected, according to the findings. While 50% of all respondents experienced furloughs last year, 66% of health care respondents indicated the same. And while only 12% of respondents report that they suspended their match in 2020 because of COVID, 44% were health care plans. NEPC notes that health care organizations expect a relatively quick recovery, however. No health care respondents expect furloughs in 2021 and all respondents that suspended the match plan to reinstate it this year. 

NEPC also found that nearly all respondents (96%) are satisfied with their investment menus. NEPC suggests that target date funds (TDFs) may help with this high satisfaction score, since 32% of respondents rate their TDF performance as “terrific.” No respondents said they had “disappointing” TDF performance. 

Additionally, there appears to be a slick uptick in the number of participants using managed accounts. Here, nearly one in five respondents (19%) reported that they experienced an increase in 2020, while 41% said no, and the remaining said they do not offer managed accounts.