The Top 5 Things I Heard from Plan Sponsors this Year
As I reflect on my conversations with large Defined Contribution (DC) plan sponsors, there are common themes, comments and questions that have come up.
In times of crises, being a fiduciary responsible for providing Defined Contribution (DC) plans for employees is especially critical. I have had several discussions with plan sponsors over the last few weeks during which the impact of the pandemic has shaped most conversations. Here are some key takeaways:
Key Takeaways: There is no silver bullet in how to communicate to participants. Relying on tried and true messages around not panicking, staying the course, remaining diversified and evaluating your risk tolerance is good. I think in many ways, plans are more equipped now relative to 12 years ago given the increased implementation of features like target date funds to provide diversification and automatic rebalancing, advice tools and financial wellness programs.
Key Takeaways: Many employers need to address some very real near-term challenges. It’s important to take a measured approach, look to lessons from past experiences and think about the long-term consequences of any decision, and it’s always wise to stay true to a robust fiduciary process.
Key Takeaways: Working with their providers, plan sponsors will need to make decisions on whether to apply some of these provisions in their plans. It is understandable why policy makers have allowed for this, but that said, as we’ve moved from a DB to a DC world it’s regrettable that one of the answers is having individuals raid their retirement savings to survive this near-term crisis. I hope future legislation will provide targeted support to those most in need without having to resort to reducing future retirement nest eggs.
Key Takeaways: The current crisis further highlights how we’ve shifted so much risk to individuals as we’ve moved to a DC world. Thoughtful asset allocation, better diversification and lifetime income solutions are becoming more relevant, and I also wonder if the immense responsibility and time sponsors put in to support their participants will lead to more outsourcing or Multiple Employer Plans.
These are certainly challenging times and at PGIM we hope to be a resource and partner to plan sponsors as we navigate the current environment. In the meantime, I wish you and your loved ones good health during these difficult days.
PGIM does not establish or operate pension plans.