Looking ahead to next year, DC plan sponsors need to prepare for a number of ever-evolving issues and threats, a new white paper suggests.
“As we look to 2022, memories of the past two years serve as a motivation to focus our efforts on continuously improving the financial stability and retirement readiness of defined contribution plan members,” says Mercer in Top Considerations for Defined Contribution Plans in 2022.
With evolving cybersecurity risks and increasingly nuanced CD litigation, plan trustees must keep pace with the changes, the document said. In addition, consolidation within the record keeping space has led more sponsors to re-evaluate their partners with a “long-term perspective”. At the same time, the landscape of CD investment products continues to generate new investment solutions, while new laws and regulations could create opportunities for sponsors to improve the retirement preparation of their plan members.
“We believe that a flexible, participant-centered approach is essential for plan sponsors who wish to have a resilient retirement strategy for 2022 and beyond,” said Mercer. As such, the company offers five key questions it believes plan sponsors should answer when planning the year ahead.
1. Do you calculate the numbers and take the data into account?
By suggesting that “data is king,” analyzing participant demographic and behavioral trends will allow sponsors to more effectively refine their retirement program tools and messages, according to Mercer. “With data analysis, sponsors can explore ways to evolve their retirement program to embrace the diversity of their workforce while promoting equity and inclusion through plan design, communications and investment strategies ”, underlines the document.
Additionally, with archivists using artificial intelligence to create more personalized experiences, the company notes that messaging reach and possible outcomes vary widely from organization to organization. Sponsors should keep abreast of their current administrator’s offerings and the broader DC space to determine which solutions may be most relevant to their populations, the document advises.
Mercer also warns, however, that the Department of Labor’s guidelines on cybersecurity best practices are a “first step” toward holding plan trustees accountable in this area. As such, trustees should think about how to protect Personally Identifiable Information (PII) and should continue to assess their administrator, as well as any third-party subcontractors, to understand how PII is protected and to help ensure an under – Adequate treatment, continuous review and documentation from the committee, the paper advises.
2. Do you follow the evolution of investment products?
Among other things, the industry will continue to see new investment products to meet retirement income needs, provide private market access to DC plans, and increase personalization, such as through managed accounts, the newspaper notes. . In addition, the new year may bring clarity to DOL’s perspective on the use of ESG factors in relation to fiduciary responsibility.
As such, sponsors should review their investment structure against the needs of their population to determine if their current investment menu is suitable, the document advises. Sponsors should also consider how their current managerial assessment approach can be applied to ESG factors and whether additional due diligence is warranted.
3. How do you manage fiduciary responsibilities?
With trustees strained to keep up with endless developments, the company believes that outsourcing or delegation of responsibilities will continue to gain popularity in 2022, one of the main reasons being lack of internal resources.
“The range of outsourcing solutions has grown and sponsors may wish to consider the options available as needs evolve,” the document said. Additionally, promoters interested in alleviating some of the burdens associated with obtaining fiduciary insurance may want to consider whether outsourcing certain aspects of DC plan management could be helpful, the paper says.
4. Is growth within the CD retirement space a problem?
For many members of the CD retirement space, such as record keepers, significant recent growth has been sparked by squeezing margins and has led to many acquisitions. For others, such as investment managers, the strength of the equity market has increased assets under management and capacity constraints. Either way, there are downstream implications for plan sponsors, the document observes.
“As some asset classes performed well in 2021, some investment managers, such as small-cap equity managers, became constrained in capacity and sponsors found themselves with gaps in their investment ranges as investment strategies closed, ”the document explains. Therefore, trustees should consider whether personalized multi-manager portfolios can offer better flexibility for asset growth, in addition to better diversification, advises Mercer.
Moreover, as the list of archivists has further condensed and the best archivists continue to grow, the firm observes that this growth puts “increased pressure” on sponsors to standardize, which makes it even more difficult for them to standardize. more difficult to use their retirement programs as a differentiator in a competitive job market.
5. How will laws and regulations affect your plan in 2022?
Without mentioning specific legislation, such as SECURE Act 2.0, Mercer predicts that 2022 will bring resolution “through initiatives that extend coverage and reward the average worker for their savings, perhaps at the expense of features and programs that have historically had benefited the best paid. ”
Accordingly, the document emphasizes that sponsors should stay informed of political discussions in Washington and anticipate questions from participants. Additionally, as the legislation draws closer to a more final form, the company suggests that those quick to respond may be able to capitalize on design opportunities and position themselves favorably in a tight labor market.