BlackRock recently released the results of its third Defined Contribution Pulse Survey. This survey includes input from 228 large defined contribution (DC) plan sponsors (PSs) and about 1,000 participants in these same plans.
While the survey covered a lot of ground, some of the findings from the plan sponsors are particularly eye-catching. For example, 54% of PSs believe the majority of their participants will need to delay retirement as they will not have saved enough to provide for retirement spending needs. This compares to only 29% of PSs who felt the same way last year. The good news is that more than half of the PSs have taken some action over the past two years to help participants.
The most common actions taken include:
- Increasing the default contribution rate
- Designating a new default investment alternative
- Changing the employer match
The results showed that plan participants are also worried about retirement spending needs and, accordingly, 93% are looking for guidance on retirement income from PSs. PSs appear to be recognizing that they have increased responsibility for their employee retirement needs.
Survey results showed that:
- 90% of PSs feel responsible to help plan participants achieve their retirement spending needs.
- 83% of PSs have taken some action to encourage participants to keep their assets in the plan post-retirement.
- While only 50% of PSs currently offer tools to assist participants with retirement spending needs, an additional 33% are contemplating doing so.
Not surprisingly, given the results noted above, 42% of the PSs do not expect their participants to roll account balances out of the plan at retirement. This will require a more detailed focus on “decumulation,” the process of deploying savings to fund a retirement lifestyle, than in the past. In fact, 57% of the PSs agreed that their target date fund (TDF) could accommodate a “decumulation” process for participants. However, please see the feature article in this newsletter discussing the shortcomings of TDFs when it comes to “decumulation.” The article also highlights a new type of TDF built to provide a stable, predictable income stream in retirement.
These survey findings and related actions are encouraging and represent the further evolution of DC plans. While this survey covered only large plans, it is not unreasonable to believe that these trends will ultimately be adopted by smaller plans as well.