Regardless of the plan purpose, it needs to be communicated effectively and frequently with plan members. This brings us back to an important point regarding shared responsibility—shared responsibility is not equal responsibility. For example, investment risk is borne exclusively by the members but litigation risk is borne exclusively by the sponsor. In the case of communicating the plan purpose, this is squarely the responsibility of the employer to ensure that the message is delivered, received and understood by plan members.
The change from DB to DC, or just the long time operation of a CAP program, implies a flexible benefit. We know the potential variability of investment outcomes and the potential for inadequate retirement exists. Something is better than nothing and plan sponsors will execute their CAP programs consistent with their recruitment and retention of talent strategies. What needs to happen is clear communication to members about what the plan can and can not do for members and the associated risks. This may also help sponsors engage more with members and likewise, encourage members to get more engaged in their retirement planning, which appears to be more and more their ultimate responsibility.
It is up to the individual employees to manage their own savings; it is up to the employer to manage the expectations of its employees.
Peter Arnold leads the Canadian Investment Consulting Practice for Buck Consultants, an ACS Company.
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