Here is where plan sponsors should focus their efforts next year, according to Mercer.

No. 1: Retirement income solutions: Provide participants with the option to annuitize a portion of their assets

2024 brought a noteworthy step in the evolution of the retirement income landscape, with the launch of an off-the-shelf target date fund that provides participants with the option to annuitize a portion of their balance. “While retirement income discussions should not be limited to investment products with annuities, we believe we are at the precipice of plan sponsors offering more robust tools, resources and investment options to support participants’ decumulation,” according to the report.

In 2025, plan sponsors should evaluate the need for retirement income and begin to establish a philosophy and roadmap for how to address decumulation. An effective retirement income offering should include varying levels of support to provide a meaningful benefit to participants.

No. 2: Simplification v. customization: Be mindful that streamlining processes benefits participants

As plan sponsors head into 2025, they should review their plan from the perspective of both the participant and plan sponsor.
• Participant: Identify the various life events participants are undergoing and determine whether your plan is structured to maximize the participant experience.
• Plan sponsor: Identify which processing elements have required corrections in the past or involve manual processes, then determine whether these risks can be supported by additional value-added services.

No. 3: Outsourcing: Alleviate administrative burdens as new SECURE 2.0 compliance kicks in

“We have seen Pooled Employer Plans gain traction as sponsors continue to consider outsourcing the investment management and administration of DC plans ...,” according to the report. “The ability to offload daily oversight and management of plan investments and administration is an attractive pressure release.”

Related: SECURE 2.0 mandatory provisions for 2025: New tool prepares employers for compliance

As companies continue to meet new compliance requirements of SECURE 2.0, “we anticipate that outsourcing may be an attractive option to help offset the additional burden that implementing changes can pose for already resource-constrained staff,” according to the report.
That is why plan sponsors might consider “some degree of outsourcing” to “bring more consistency to oversight and plan operations, perhaps while providing cost or performance improvement to participants,” according to Mercer. Outsourcing is a viable option for "plan sponsors seeking to professionalize investment decision making, alleviate administrative burdens and enhance operational efficiency.”