Inspired by Innovation:
The Actions Early Adopters Are Taking in Their DC Plans
If you elect to comment or engage with our content via third-party social media websites, you authorize Aon to have access to certain social media profile information. Please click here to learn more about information that may be collected when using these tools on Aon.com
February 2015
Executive Summary
“If you want something new, you have to stop doing something old.”—Peter Drucker
Defined contribution plans have become deeply entrenched as the primary retirement vehicle for most American workers. However, some of the statistics about our savings can be sobering. The Employee Benefit Research Institute (EBRI) recently determined that six out of 10 workers report they and/or their spouse have less than $25,000 in total savings—including 36% who have less than $1,000. Financial wellness firm HelloWallet determined that 60% of all workers accumulate debt at a rate faster than they’re growing their savings
In response, some plan sponsors are taking the reins and heeding Peter Drucker’s advice above. They’re trying something new because they don’t want the old outcomes.
But who are these employers, and what specifically are they doing?
As part of our annual Hot Topics in Retirement survey, we asked employers to identify where their beliefs on innovation and early adoption fell across a spectrum of possible answers. The group who considered themselves more innovative formed the basis for this paper. Among this group, we found the following:
- Innovators are more likely than the rest of the respondents to have tools in place to assist their employees with improving their financial wellness. They were also far more likely to integrate financial wellness into their physical well being initiatives (39% versus 20%) and to communicate about the link between financial stress and physical well being (38% versus 25%).
- Innovators are also taking more actions that are designed to drive as much money in the plan as possible. This could be through boosting participation in the DC plan (encouraging participants to save more).
- Innovators also want to keep as much money as possible in the plan. This is primarily done by discouraging participants from taking loans against their account and having former employees keep their money in the plan. All told, more than one out of three innovators (34%) prefer to have terminated vested employees keep the money in the plan compared to only one out of five (20%) of the rest of the respondents.
- Innovators are more likely to provide their participants with the best tools and funds available for investments. This could be in the form of providing more institutional funds instead of mutual funds (40% of the innovators have institutional funds versus 27% of the rest of the population) or offering more creative fund offerings. Nearly one quarter of the innovator group (23%) have moved to a custom target date fund compared to 15% of the rest of the population.
This paper goes into more detail about the innovators’ answers, offering a glimpse into what will increasingly become the norm in the next few years, and suggests some actionable items all plan sponsors may consider to help improve their plans.
Download the whitepaper to read more!
