Given the current market conditions and the changes to come in the new year, consulting firm Mercer has made recommendations for DC plan sponsors for 2017.
Priorities for sponsors to consider, the firm said in a report, include broadening their focus beyond retirement.
Companies need to be cognizant of employees' other financial needs that may be keeping them from devoting enough time and attention to retirement.
Recommended For You
Helping employees to better manage their overall financial situation will improve retirement preparedness as well.
Sponsors should also consider whether student loan repayment should be included in the design of their DC plan—particularly since many employees are far more focused on student loan repayment than they are on retirement savings and as a result miss employer matching contributions to the latter.
For that matter how well do matching programs work? Does participants' behavior conform to the desired outcome, or does the design need to be revised to encourage employees to make better choices?
The new fiduciary rule should also prompt a review of managed accounts, as well as the role accepted by the managed accounts provider. Are there potential conflicts of interest? What type of advice will the provider give, particularly related to distributions?
What other effects will the fiduciary rule have on the plan? Fiduciaries need to track whether vendor services are appropriate and how those services are changing to accommodate the rule.
Are target-date funds still an appropriate investment? Has the participant group changed so that TDFs should change as well? Perhaps the particular TDFs used by the plan are no longer appropriate and need to be changed.
And what about retirement income options? Perhaps it's time to consider adding flexibility to accommodate partial withdrawals by participants, or other options.
When reviewing their DC plan, sponsors need to look not only at participants but at nonparticipants as well. What are their priorities, needs and behaviors? How are existing investment options used? How well prepared are participants, and how can nonparticipants be encouraged to jump in?
Two other common headaches are fee structures and cyber security. The bottom line is not the only consideration when it comes to fees; if a plan is not effective, then the fees may not be appropriate, whether it's because they're too high for the services provided or too low because of a bare-bones plan.
And sponsors should have plans in place to address cyber attacks, which, the paper says, are not a matter of if but when.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
