Investment volatility (52 per cent), retirement benefit costs (49 per cent) and regulatory compliance (47 per cent) are U.S. employers’ top three concerns now and for the next two years, according to a new survey by Willis Towers Watson.
Its survey, which polled more than 300 U.S. employers, found that nearly two-thirds (31 per cent) reported they have had their retirement plans audited by the Internal Revenue Service of the Department of Labor in the past two years.
Despite concern around regulatory compliance, less than half (44 per cent) of respondents haven’t conducted an operational compliance review of their defined benefit plans over the past two years, while 42 per cent haven’t conducted a similar review of their defined contribution plans. About a third indicated this was due to limited budgets and resources.
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“The fact that one in three retirement plans have been audited should send a wake-up call to many plan sponsors,” said David Speier, senior retirement consultant at Willis Towers Watson. “Regulatory compliance is a top concern, and there is room for a fair number of employers to improve the management of this risk.
“Proactive reviews of plan operations and compliance processes, for example, should be given a much higher priority at organizations that do not have a structure in place to conduct proactive reviews.”
Half of respondents have separate committees for their plan administration and investment governance, according to the survey, and more than half of the members of these committees are formally trained, either when they join (26 per cent) or on a scheduled basis (36 per cent).
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Among respondents with a DC pension, nearly 90 per cent engage a third-party advisor to assist with the investment options available to their employees. More than a quarter (26 per cent) of DC plan sponsors fully or partially outsource at least one aspect of their investment services, while 33 per cent of DB plan sponsors do. Manager selection and implementation activities are aspects that are most frequently outsources.
The survey also found that more than half of DC plan sponsors monitor various elements of their plan at least quarterly or more frequently, including: investment managers, investment goals and objectives, participant asset allocation, fees and expenses, and participation and contribution rates.