Plan sponsors want to help their employees prepare for retirement, but they also want to recruit and retain great employees. To do this they have started fortifying their retirement plans to improve participants’ retirement outcomes, according to a report by J.P. Morgan Asset Management.
“What Plan Sponsors Want From Their DC Plans—And What They Are Doing About It” is based on the company’s 2013 Defined Contribution Plan Sponsor Survey Findings. The company surveyed 800 plan sponsors from December 2012 through January 2013, representing retirement plans between $1 million to more than $1 billion in assets.
Larger plans lead the continued transformation of defined contribution plans, but the survey did find that changes are taking place at a modest rate among smaller ones. More than 75 percent of all plan sponsors and 85 percent of those with larger plans rate having their plan help make sure employees have a financially secure retirement as one of today’s highly important goals.
Only 44 percent of those surveyed consider the percentage of participants whose account balances are on track to replace at least 80 percent of their final salary in retirement as a highly important criteria to measure plan effectiveness.
Employee satisfaction level and investment performance ranked as the most important measures of plan success.
Only one-quarter of respondents felt that promoting an understanding of retirement income was a top goal they should be striving for. Most felt that educating employees about benefits and having employees view the plan as a benefit were the top goals they should promote.
Twice as many say they base plan design decisions on what they perceive to be participant needs (29 percent) or on cost to the company (28 percent) vs. getting the maximum number of participants to experience adequate income in retirement (11 percent).
Between 65 percent and 75 percent of plan sponsors felt their DC plans have been highly effective in recruiting, retaining and demonstrating a level of caring for employees, while only 50 percent to 60 percent say their plans are highly effective in providing financial security for employees, helping to ensure that employees have a financially secure retirement and allowing employees to retire at their normal retirement age.