The end of the calendar year is a time that many of us make resolutions for personal improvements to ensure the upcoming year is even better than the last one. In the spirit of New Years’ resolutions, here are five “resolutions” that defined contribution pension plan sponsors can undertake in 2017 to ensure their program is even more successful in the year ahead.
1. Set strategic objectives for your pension committee and establish metrics for measuring success.
Clearly defined beliefs, goals and objectives are critical for effective decision making and tracking progress. For example, what is the desired level of paternalism for your committee? Conduct an investment beliefs survey, discuss objectives and document the outcomes. Establish a scorecard with key metrics to measure and assess progress annually.
2. Review your record keeper.
The Canadian Association of Pension Supervisory Authorities guidelines specifically call out the need for plan sponsors to review their record keeper as part of their ongoing duties in maintaining a defined contribution plan. The marketplace in Canada has continued to evolve as established record keepers have consolidated and smaller carriers have stepped in. Adding to this, technology is quickly becoming a much more important component of the total member experience.
Read: Top 50 DC plans report: A look at the latest governance trends
With the changing industry landscape and rapid pace of technological improvements, it can be difficult for sponsors to be sure they’re receiving the best total package of services available for their members. A competitive review of record keepers can help to fulfill your obligations for periodic reviews and is also an opportunity to ensure you’re making the most of your record keeper’s capabilities and resources.
3. Focus on the financial well-being of employees.
In a recent study of employees, one in five stated that financial problems are negatively impacting their lives, and 74 per cent believe they’re facing a less comfortable retirement than their parents. While the expanded Canada Pension Plan will be welcome news to many Canadians, the full impact of the benefit will not be felt for several decades. For now, however, sponsors are increasingly concerned for their current employees’ financial well-being.
Read: CAP Suppliers Report: What’s next after this year’s landmark CPP deal?
Plan sponsors are starting to consider whether and how to integrate CPP benefits and costs through changes to elements of their total rewards programs, as well as exploring other avenues, such as mandatory enrollment and escalation features that will promote financial well-being. Finally, there has been interest in exploring broader financial planning tools to support members with their overall finances.
4. Develop an engagement strategy to improve participant behaviours.
With five generations in the workforce together, engaging with employees is more difficult, and more critical, than ever. Historical communication strategies were broad-based and non-targeted. Best practice in 2017 involves smarter communications that leverage our knowledge of participant behaviour and financial decision making. Communications should be outcome-focused and generationally targeted. Employee segmentation analysis allows sponsors to develop targeted communications tailored to at-risk participants based on their unique behaviours.
5. Evaluate solutions to improve financial security for participants in retirement.
Currently, there are limited offerings and products in the lifetime income solution/decumulation landscape, although the market is evolving and plan sponsors are slowly embracing options to help employees improve their financial security in retirement.
Read: 2016 CAP Member Survey: Deconstructing how different employees view their retirement
While participant demand for these solutions remains low, we suspect this will change as longer life spans and historically low rates of return on retirement savings cause longevity risks to spike. We would encourage sponsors to remain educated on current offerings and to press for more robust solutions in the future.