Are DC plans ready for 2016?

2016 is likely to bring even more change and increased complexity for defined contribution plans.

  • Plans face increased scrutiny—and fiduciary standards are a moving target
  • Interest rates are starting to climb—but yields remain stubbornly low
  • Market volatility is increasing—making steady returns harder to find

Despite these headwinds, the right focus and a more sophisticated tool set can help plan sponsors and their advisors deliver strong, consistent outcomes for participants.

 


How can you help participants? Consider these four actionable ideas:

1. Keep people invested through all market cycles

Seek to protect participants with investment options that give them the confidence to stay the course and keep them from overreacting to market volatility. Evaluate target date funds and other QDIA options based on their ability to generate return and balance risk to keep participants investing consistently.

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2. Rethink the equity line-up

Changing markets, new alpha generation strategies, more complex risk management and a focus on fees have complicated the choice between index and active strategies. It’s time to combine a fuller spectrum of active and index solutions to help deliver strong, consistent outcomes for participants and meet fiduciary responsibilities. 

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3. Refocus your bond fund options

Plan sponsors will need to be clear about their bond fund objectives, whether they are intended to provide diversification against stock market volatility or find income and return as standalone options. That requires a deeper understanding of fixed income risk and consideration of a wider range of fixed income strategies, including multi-strategy solutions that offer flexibility and more robust potential returns.

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4. Drive savings and increase participation through plan design

Savings is the foundation for retirement readiness. But how much is enough? Take the time to measure participants’ retirement readiness and understand which plan design levers have the most potential for optimizing outcomes.

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