Nearly 60% of defined contribution plan sponsors plan to take action in the next 12 months in response to increased Department of Labor and IRS audit and enforcement activities.

"Managing DC retirement plans has become more and more of a challenge for plan sponsors," says Amy Reynolds, partner in Mercer’s DC plan retirement consulting business.

"DC plans were originally intended as supplemental savings vehicles to complement traditional defined benefit pension plans,” Reynolds observes. "But today DC plans are the ongoing and primary employer-sponsored retirement plan for most Americans and are therefore under much more intense scrutiny. Employers are prioritizing their resources to respond to increased fiduciary concerns, regulatory activity and governance requirements, with less focus on participants’ retirement savings."

In order to mitigate these growing concerns, of the employers who plan to proactively change coarse, 65% plan to conduct an internal review of plan operations. In addition, 27% intend to engage their vendor to review administration while 22% will conduct an independent operational compliance review. 

Pending fee-disclosure rules will augment fee information available to participants. In preparation, 60% of plan sponsors expect to take some kind of action, with 53% indicating they will conduct an administrative fee benchmarking study; 28% will re-evaluate who (participant or employer) pays administrative fees; and 21% will change from a nontransparent bundled pricing arrangement to a transparent, fixed administrative fee pricing arrangement.

Despite the negative impact the market downturn has had on participant accounts, 77% of plan sponsors intend to maintain their current level of employer contributions.

It appears that many employers (45%) have an expanding interest in aiding participants in managing the distribution phase of retirement by adding some type of annuity option or minimum withdrawal benefit to their DC plan. To further adhere to their fiduciary responsibility, 25% of respondents intend to add investment advice in response to finalized Labor Department rules.

For more information on the study, visit www.mercer.com.

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