What keeps companies that sponsor a corporate retirement plan up at night? Though fees and performance of investments remain top concerns according to a recent Willis Towers Watson survey with 300 plan sponsors, more attention is being paid to the retirement readiness as our nation, and the entire world, moves from a DB world to a participant directed DC world.
Noted NY Times columnist Thomas Friedman wrote in that it’s now a 401k world where, “Governments will do less for you. Companies will do less for you. There will be fewer limits, but fewer guarantees.” Senior management, especially CFOs, thought that moving from a DB to DC plan let them off the hook by shifting liability from the company to employees. But what happens when people who should be retiring are not prepared? They keep working making for a stagnant, high cost work force that is not competitive.
So the results of the Willis study are encouraging. Of all companies responding, 39% view their employees’ retirement readiness as a current risk and 44% view it as a risk two years from now. Even more companies (58%) that have a DC plan only are concerned. Though top investment priorities remain fees by 74% of companies and performance at 61%, 18% view benefit adequacy as a priority expected to grow to 38% in two years.
The top four concerns of employers in the Willis study include:
- Investment volatility
- Costs
- Regulatory compliance
- Employees unable to retire
So while investment selection and monitoring will continue to be a top priority and concern for companies with a DB plan, DC plan sponsors should be focused more on what moves the needle on retirement readiness which starts with time and savings rates followed by investments and fees. The sooner people start saving, and the more they put away, the better. Perhaps companies are starting to get the message.
