Simplicity surpasses flexibility and choice as the leading philosophy
behind retirement plan design, according to the 2014 MetLife
Qualified Retirement Plan Barometer (QRPB), released today. An
overwhelming majority, 89%, of companies that offer broad access to
defined benefit (DB) and defined contribution (DC) plans and 77% of
DC-only plan sponsors say “keep it simple and avoid over-complication,”
when it comes to retirement plan design.
“Since the advent of the modern DC plan, plan sponsors have focused on
how effectively the plan provided choice and flexibility to participants
in investment selections. The shift toward simplicity is a potentially
significant change in how plan sponsors view their role,” said Cynthia
Mallett, vice president, Industry Strategies & Public Policy for
MetLife’s Corporate Benefit Funding group. “This new perspective may
signal a movement to a more balanced division of responsibility in DC
plans, which is in line with DC plan’s emerging role as the primary
retirement plan chassis of the future.”
The Barometer was created by MetLife to assess whether and to what
extent a new culture is taking hold among plans sponsors at FORTUNE 1000TM
companies – one which places equal emphasis on retirement savings and
retirement income. The higher the value on the Barometer, the stronger
the overall culture of retirement income. While the high score of 89
remains the same from the inaugural study in 2011, the range of scores
has narrowed significantly, driven by improvement in the lowest scores,
rising from 19 to 30.
In addition to the shift toward simplicity, the QRPB found other
indicators that plan sponsors are moving from a culture focused on the
accumulation of retirement savings to one focused on retirement income.
The study found that a majority of companies that only offer a DC plan
communicate to all or most of their participants about key topics
related to retirement income. These include the effects of longevity
(56%), the importance of establishing target retirement income levels in
relation to current pay (56%), and communications about retirement
income throughout the participant’s tenure in the plan (52%). At the
same time, DC-only plan sponsors are exploring guaranteed lifetime
income options.
“DC-only plan sponsors are taking a serious look at lifetime income.
According to the QRPB, over half (57%) of DC-only plan sponsors who do
not include an income annuity have discussed this option with their
record keeper,” noted David DeGeorge, vice president, Life & Income
Funding Solutions, MetLife. “Over a third, 34%, have explored lifetime
income solutions available in the marketplace and 11% have already
conducted due diligence about the providers of these solutions.”
Also highlighted in this year’s QRPB are the differences in attitudes
and practices among companies that offer only a DC plan, and those who
provide a broad coverage DB plan combined with a DC plan. The Barometer
score across all plan types was 58 out of a possible 100—companies that
offer broad access to DB and DC plans outpace their peers with a
Barometer score of 71, indicating a much stronger retirement income
culture.
“Based on the QRPB’s findings, companies considering restructuring their
qualified plans to a DC-only format could benefit from applying the
retirement income mindset of a DB plan to the new DC plan framework,”
commented Mallett. “One way to do this is through
communication—companies that offer broad coverage DB plans and DC plans
appear to be more likely to communicate about retirement income during
employees’ entire careers, with 72% doing so compared to 52% of their
DC-only peers.”
The study also found that DC-only plan sponsors are more than twice as
likely to believe that their workers will reach retirement age with
inadequate savings to generate sufficient retirement income, with 58%
agreeing with this statement compared to 28% of those companies offering
broad coverage DB plans and DC plans.
To learn more about companies’ evolving retirement benefits philosophies
and steps plan sponsors can take to move toward a culture focused on
retirement income, access the 2014 MetLife Qualified Retirement Plan
Barometer at metlife.com/Barometer2014.
Research Methodology
Matthew Greenwald & Associates and Asset International, Inc., publisher
of PLANSPONSOR and PLANADVISER magazines, conducted the online survey of
Fortune 1000TM companies on behalf of MetLife. To be eligible
for the study, participants needed to work for a Fortune 1000 company
that offers at least one DC or DB plan (including cash balance/hybrid
plans). Participants also had to have at least a moderate amount of
influence over decisions regarding their company’s retirement benefits
policy and plan design.
A total of 152 interviews were completed between May 21 and June 21,
2013. The study can be downloaded at metlife.com/Barometer2014.
About MetLife
MetLife, Inc. (NYSE:MET), through its subsidiaries and affiliates
(“MetLife”), is a leading global provider of insurance, annuities and
employee benefit programs. MetLife holds leading market positions in the
United States, Japan, Latin America, Asia, Europe and the Middle East.
For more information, visit www.metlife.com.
Copyright Business Wire 2014