AON/Hewitt recently released the results of a survey they conduct every couple of years on trends and experiences in Defined Contribution (DC) plans. This year’s survey included 546 employers of various sizes and industries. About 30% of the Fortune 500 was represented in the survey. Not surprisingly, DC plans now constitute the primary source of retirement income for retirees. Additionally, automation in DC plans, which includes auto enrollment, auto escalation and auto rebalancing, is becoming a standard retirement plan feature.
Investments continue to be a key area of focus for plan sponsors. Most employers offer investment options and advice tools to assist participants in making better investment decisions. Target date funds are now found in 8 of 10 plans. Additionally, outside investment advisory services (e.g., investment guidance, advice, managed portfolios) continue to grow to assist both plan sponsors and participants.
Plan expenses are the top concern of plan sponsors. With legislation focusing on expenses, plan sponsors are actively seeking to understand fees better and develop effective ways to communicate fees to plan participants.
Additional highlights from the survey include:
- 93% of plans include employer contributions
- 85% of plans include employer matching contributions
- 43% of plans vest immediately
- 56% of plans have auto enrollment
- 78% of plans default into age-appropriate target date funds
- 51% of plans offer auto deferral escalation
- 83% of plans employ an outside investment consultant
- 87% of plans have an investment policy statement