Defined contribution plan sponsors aren't confident that participants will have enough money to retire when they hit their planned retirement age. In fact, they believe that DC plans need to be redesigned.
Those are some of the findings from SEI's survey of the state of the DC market in the U.S., which revealed that 84 percent of plan sponsors don't think their participants will have enough money saved to be able to retire between ages 62–65.
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With 57 percent feeling that DC plans were not designed to be primary retirement vehicles, but were instead designed to serve as a recruitment tool for employers to attract top employees, it's probably not surprising that those sponsors feel the plans should be redesigned.
Since 62 percent of respondents view their DC plan as their employees' primary investment vehicle, that lack of confidence in their effectiveness is alarming.
While 64 percent of respondents still offer a defined benefit plan (20 percent provide a DB plan in addition to a DC plan; 44 percent indicated that the DB plan was provided along with DC and supplemental savings plans), 74 percent of DB plans are closed to new hires and a significant portion have stopped accruals for participants.
In addition, an overwhelming majority—88 percent—are worried about how those employees hanging on to their jobs to earn more retirement cash will affect their businesses.
Among the effects they fear are increased health care costs (77 percent), the departure of younger employees blocked from advancement by the presence of those older workers (64 percent), the added expense of retaining all those higher-salaried employees (63 percent), and declines in performance.
Forty-four percent fear those performance declines from older employees who don't want to be in the workplace any longer, and 43 percent fear them from younger employees who resent their lack of upward mobility.
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