In a meeting with a plan committee yesterday, we asked about the plan’s primary purpose. Have you discussed that question within your committee or trustee meetings? If so, it’s likely that the answer has begun to shift over the last few years. The old answer was fairly uniform: “to attract and retain employees”. And although that continues to be a purpose, an increasing number of plan sponsors are providing the answer we heard yesterday: “to ensure our employees have enough money to retire”.
J.P.Morgan’s 2017 Defined Contribution Plan Sponsor Survey asked plan sponsors to identify the main reason for offering their respective plans. The number who responded with “Ensuring sufficient income in retirement” doubled (from 12% to 24%) in only four years. That helps us to see a change in the philosophy behind offering and maintaining plans. Of course it’s also important to see whether plan sponsors are making the changes necessary in order to accomplish the stated goal. The survey indicates they are:
- Automatic enrollment utilization continues to increase;
- More companies are also using automatic escalation; and
- Support for re-enrollment is increasing.
If you’ve not asked yourself – or been asked – about your plan’s primary purpose(s), we recommend this for your next trustee meeting. Why do you have your plan? The answers may surprise you.