While nearly three-fourths of respondents (74%) said the most prevalent reason for offering a DC plan is to provide their employees with an adequate retirement at a reasonable age, more than half of the respondents cited benefit competitiveness, benefit plan cost, and attraction and retention as the top three issues driving plan design.“There are several steps employers can take to help their employees generate an adequate income at retirement,” said Alec Dike, a senior retirement consultant at Towers Watson. “These include enhancing communication efforts to provide employees with a better understanding of how DC plans work, including how much to save, investment options, risk and return, and how to monitor and adjust assets.” Other findings from the survey include:
- The average number of investment options offered in a DC plan is decreasing. The number of employers offering 20 or more options declined from 32% in 2010 to 24% this year. Nearly seven in 10 (69%) respondents offer between 10 and 19 investment options. Nearly one-half of respondents now offer a brokerage window as an option.
- The use of lifetime income distribution options (i.e., annuities) is low. Only 6% of respondents currently offer a lifetime income distribution option; of this group, 82% report that less than 5% of participants elect the annuity option. Forty-five percent offer the option only at the time of retirement, and the plan is responsible for providing the lifetime income distribution.