PlanAdvisor points out key factors borrowed from Defined Benefit plans that could allow Defined Contribution (DC) plans to enhance an individual retirement plan.
Nearly 70% of plan sponsors interviewed are optimistic that DC plans are capable of providing sufficient retirement income to working Americans. However, respondents also believe that DC plans could improve their chances of participant success by importing winning strategies from institutional investors, including:
- Investment Approach: Establish a streamlined investment menu that includes simplified pre-mixed default options, access to alternatives and cost effective investment strategies.
- Fee Structure: Minimize overall participant cost by utilizing institutional investment vehicles, maximizing the plan scale, conducting regular fee benchmarking and reducing or eliminating revenue sharing.
- Governance: Dedicate appropriate resources and attention in proportion to DC assets invested, create efficient decision-making process and be mindful of fiduciary liability.
- Decumulation: Enhance the plan’s decumulation strategy by providing education about distribution options, offering appropriate asset preservation and income generating investment products, and maintaining an ongoing dialogue with retirees.
- Communication: Maintain lifetime engagement with participants through personalized communications clearly focused on specific outcomes.