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DC Plans Focused on Responding to Recent Regulatory Action

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Sponsors of defined contribution (DC) plans are focused on responding to Department of Labor and Internal Revenue Service activities, a new Mercer survey of plan sponsors finds.

“Managing DC retirement plans has become more and more of a challenge for plan sponsors,” says Amy Reynolds, a Partner in Mercer’s DC plan retirement consulting business, in a prepared statement.

“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 response to increased Department of Labor and IRS audit and enforcement activities, nearly 60% of plan sponsors surveyed said they intend to take some kind of action in the next 12 months, including:

  • l 65% plan to conduct an internal review of plan operations;
  • l 27% intend to engage their vendor to review administration; and
  • l 22% will conduct an independent operational compliance review.

Pending fee-disclosure rules will increase information available to participants regarding fees. In preparation, 60% of plan sponsors indicate they will take some kind of action, as follows (again, more than one response was permitted):

  • l 53% will conduct an administrative fee benchmarking study;
  • l 28% will reevaluate who (participant or employer) pays administrative fees; and
  • l 21% will change from a nontransparent bundled pricing arrangement to a transparent, fixed administrative fee pricing arrangement.

Other findings include:

  • l 77% of plan sponsors intend to maintain their current level of employer contributions, despite the negative impact the market downturn has had on participant accounts;
  • l 45% of plan sponsors are considering adding some type of annuity option or minimum withdrawal benefit to their DC plan, reflecting a growing interest in helping participants manage the distribution phase of retirement; and
  • l 25% of respondents intend to add investment advice in response to finalized Labor Department rules.


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