Defined contribution plan sponsors should be considering three issues in 2016 that pertain to their objectives.
That’s according to a Willis Towers Watson report, which says that as U.S. pension assets increasingly move over to DC plans—58 percent as of the end of 2014, compared with 52 percent in 2004—plan sponsors are under growing pressure to help employees achieve a financially comfortable retirement.
In its most recent global benefits attitudes survey, the firm found that financial concerns continue to be a major source of stress for about 70 percent of people.
The report said that that stress level carries over into an impact on company health plans and is also reflected in absenteeism and workplace productivity.
As sponsors try to improve plans to achieve retirement readiness among their employees, the report recommended they consider three issues:
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the bridging of financial wellness and retirement readiness
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aiming for better participant engagement and savings to improve retirement outcomes
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enhancement of oversight and strengthening of governance support
The report offered suggestions for ways plan sponsors might help with those issues:
Offer incentives to ease employee financial stress
To more closely relate financial wellness with retirement readiness, the report suggested employers incentivize actions that cut employee financial stress, since despite employee interest in financial wellness programs they don’t always follow through on recommended actions. “Plan sponsors,” the report suggested, “could assist employees with incentives that integrate retirement planning into the whole financial wellness picture.”
Communicate in more concrete, less abstract ways
To better engage employees and boost their savings rates, sponsors should consider changing the way they communicate with DC plan participants so that the data provided is less abstract and more tangible, such as the projected age of financial independence or concrete balance drawdown projections.
In addition, using behavioral techniques that go beyond target-date funds and auto-enrollment and escalation can help them to increase their savings rates.
Take a holistic view of retirement plan success
Last but not least, the report suggested that, with regard to oversight and governance support, sponsors look at their retirement programs more holistically, bring in any needed additional support and reconsider existing measurements of DC plan success.
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