Defined contribution plan sponsors have to stay aware of plan design developments to improve their benefits offerings for their specific workforces, according to a new report by Callan.
As workplace demographics shift, it’s important for plan sponsors to make sure their DC plan features are keeping up with those changes to ensure the benefits they’re providing are most effective in supporting their current members.
The report suggested plan sponsors develop a benefits philosophy, which should establish how the company wants to address its benefits as part of a broader business strategy by managing issues like competitiveness, coverage level adequacy and desired behavioural prompts for members. It should also include a view on the desired level of shared responsibility between plan sponsor and member, overall equality among workers, as well as the current business conditions that could impact what a sponsor feels it’s able to provide.
For example, as the baby boomer generation exits the workplace, DC plan sponsors need to consider the latest tools to help them with decumulation, the report said. And, as younger generations begin to make up more of the workforce, plan sponsors should pay attention to their requirement to save for competing major expenses, as well as retirement.
Employers should identify issues among their broader workforces and ensure their DC plans are designed to work in conjunction to ameliorate those specific issues, it said.
In recent years, for example, automatic enrolment in DC plans has been on the rise. The report suggested plan sponsors think carefully about how to implement the tool in addition to considering whether to include the feature at all. It said auto-contribution can be far more effective if the contribution level increases over time, especially when the increases coincide with a raise in wage or salary, making the member less likely to feel burdened by the uptick.