Plan sponsors might feel increasingly responsible for helping participants achieve retirement security, but they need some help in meeting the goals they set for their defined contribution plans.
That's the word from a J.P. Morgan Asset Management survey. It resulted in a white paper "Aligning goals, improving outcomes: 2015 Defined Contribution Plan Sponsor Survey Findings."
The white paper offers suggestions on how sponsors can improve employee outcomes and more closely align their good intentions and plan outcome. To make sure employees can retire with sufficient income, it suggests three things plan sponsors should do:
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Offer automatic enrollment to boost participation.
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Adopt automatic contribution escalation, so participants save enough.
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Use such options as target-date funds and reenrollment to encourage employees to invest appropriately.
The survey uncovered several disconnects between sponsor DC plan goals and how they view success.
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Among the problems the survey uncovered were the fact that, while 75 percent of sponsors consider that helping employees to have a financially secure retirement is a highly important goal—in fact, it's up from just 50 percent only two years ago—sponsors don't actually rank that goal all that highly when asked to rank it along with a series of more traditional goals.
Retaining quality employees, at 83 percent, came in considerably higher than making sure employees have enough money for retirement.
So did demonstrating a level of caring for employees (80 percent). And making sure employees have the ability to retire at their targeted retirement age ranked even lower, at just 66 percent.
In addition, sponsors don't seem to appreciate the importance of some criteria for measuring outcome-related goals.
For instance, plan sponsors were asked to rank the percentage of participants with account balances on track to replace 80 percent of final salary. Although it's definitely rising in importance, just 53 percent of plan sponsors ranked it very or extremely important.
It's dead last on the list of success criteria.
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