Mercer has just released its annual “10 Steps DC Plan Sponsors Should Take” for the coming year, or things employers should do to ensure their defined-contribution plans are meeting the needs of plan participants while staying in compliance and taking advantage of recent innovations. Some of these recommendations include the usual about financial-wellness education, monitoring participants’ progress against their retirement goals, reviewing plan fees and checking up on providers to make sure they’re staying compliant.
Rather than list all 10 steps, I’ve focused on the five that address relatively new developments.
First, you should make sure your plan is responsive to participants’ retirement-security needs by studying the latest available options, such as services promoting Social Security optimization. You should also be prepared to “respond to favorable regulatory changes,” such as the increased guidance on the use of in-plan annuities.
Second, you should conduct an in-depth analysis of your current, or future, managed-account provider. Heightened scrutiny of such providers, including the Government Accountability Office’s recommendation to the DOL to conduct an in-depth review of managed-account providers, means you should be taking a close look at your processes for selecting and monitoring these providers.
Third, make sure the capital preservation option in your plan is still the most appropriate for plan participants. Capital preservation options such as money market and stable value options have an important place within the DC framework. Given the new fixed-income products that have arrived on the market within the last few years, along with the increased SEC regulations that will be placed on money market funds in 2016, now is a good time to review your plan’s offerings to determine whether they’re still meeting participants’ needs.
Fourth, think about what a disabled employee can do to keep current with his or her plan while out on leave. As Mercer notes, when employees go out on disability, their DC plan contributions can take a hit. This causes a gap in participants’ retirement preparedness that, depending on their leave’s duration, they may never be able to fully close. However, new regulations that allow continued contributions during periods of disability could mean that such a gap is not inevitable.
And finally, # 5: keep an eye on liquidity. Last year saw major growth in liquid alternatives, says Mercer, such as diversified inflation and hedge funds. Exposure to options such as these is not new: Many target-date funds have some exposure to these options. Plan sponsors need to review how these liquid alternatives are defined, reviewed, implemented and monitored within the plan. Make sure these exposures are appropriate for plan participants based on what’s available on the market today, and determine whether or not additional exposure should be considered.Twitter It!