Increasing DOL audits and retirement readiness are major concerns for larger plans according to the 2016 Willis Towers Watson U.S. Retirement Plan Governance Survey conducted with 300 plan sponsors, mostly larger plans with more than 5,000 employees. Though smaller companies have fewer resources and fewer have to deal with DB plans, the issues raised by larger companies are nonetheless germane.
The big headline is that 31% of companies indicated that there were audited by the DOL which has dramatically picked up enforcement and will likely continue to do so – almost half of all plans with more than 25,000 were audited.
Companies concerned about a stagnant workforce and higher labor costs are paying more attention to retirement readiness growing to 44% in two years and 38% in 2016 with 58% of companies without a DB plan concerned. More resources are likely to be allocated to employee education and engagement with 58% likely to conduct an operational compliance review. There is a growing use of advisors and consultants to help with investments. Most companies have a committee with larger ones using separate committees to review benefits and investments.
There are three major risks for DC plans reflected in the Willis study:
- Retirement Readiness
While larger companies cite lack of time and regulatory issues as barriers to being able to run their DC plan, smaller companies face the additional problems of limited resources, expertise and training. Reliance on third parties is critical and though record keeper consolidation has winnowed out some of the weaker providers, many plans still use advisors that do not have the proper knowledge, experience and training.
The increase in DOL audits should help HR professionals get more resources but only when senior management gets concerned about higher labor costs and employee stagnation caused by employees not able to retire will serious about improving their DC plans. The Willis survey seems to indicate that companies are getting more serious about retirement readiness.
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