Changing DC plan features: Sponsors look to hit 'refresh'

In a pseudo-post-pandemic world, where employers are still dealing with The Great Resignation, they’re continuously seeking ways to attract and retain employees. Besides considering the myriad benefits and perks available, an increasing number of plan sponsors are looking to enhance their defined contribution (DC) retirement plans.

According to a survey by Willis Towers Watson, 75% of DC plan sponsors made a change to their plans in the last two years and expect at least one change over the next two years. Also, an additional 14% that made no changes over the past two years are planning to make at least one change in the near future.

The enhancements being looked at by plan sponsors will focus on employee experience (82%) and financial wellbeing (78%).

“Employer interest in helping employees address both their short- and long-term financial concerns has never been greater,” said Alexa Nerdrum, managing director, Retirement, WTW.

“To that end, employers are refreshing their DC plans to give employees both the opportunity to save more for retirement and the flexibility to use both their personal and employer contributions in innovative ways to manage their financial needs.”

The 2022 Next Evolution of DC Plans Survey polled 363 U.S. employers that offer a DC plan, representing about 8.4 million workers across diverse industries, about changes they are making or expect to make:

Auto-deferral: More than a quarter of those surveyed expect to make changes to their plans’ automatic deferral features.

Contribution strategy: Nearly four in 10 sponsors (38%) expect to adopt an innovative contribution strategy. These include allowing participants to use their contributions to reduce student loan debt or directing contributions to an emergency savings fund or a health savings account.

Financial wellbeing: Employers are also continuing to explore ways to integrate DC plan strategy with enhanced financial wellbeing with about four in 10 respondents planning or considering this step on top of 42% having already done so.

Communications, support, tools: More than nine in 10 (92%) offer or expect to offer access to personalized support, while 91% use or expect to use targeted communications tailored to specific workforce segments. A similar number (91%) offer or expect to offer digital tools to help employees with budgeting and spending.

Perhaps because of the pandemic and a shift in the way people see employment, 55% of employers are expecting attraction and retention issues. One third of those respondents consider their DC plan as part of their tools to attract and retain employees, and want to enhance certain aspects of the employee experience.

“Employers have a golden opportunity to leverage their DC plan and gain an advantage in attracting and keeping talent,” said Dave Amendola, senior director, Retirement, WTW. “Our research shows that employees prioritize flexibility and choice in their benefit package, view retirement benefits as a key reason to join or stay with a company, and want more help from their employer with planning for a financially secure retirement.