Posted on 06 Jul 11
Faced with rising benefit costs and increased regulatory complexity, four out of 10 U.S. employers expect to spend more time governing their employer-sponsored retirement plans over the next two years, according to a survey by Towers Watson, a global professional services company. The survey was based on responses from 245 midsize and large employers that sponsor defined benefit and/or defined contribution retirement plans. The survey also found that while most employers are concerned with retirement plan compliance, many are not taking affirmative steps to help them manage those risks.
The Towers Watson survey found that 40% of employers expect to devote more time addressing retirement plan governance issues over the next two years, while only 2% anticipate spending less time. Among those respondents that expect to spend more time on plan governance, a vast majority (86%) cited regulatory complexity as a major reason, while two-thirds (67%) plan do to so as part of a greater emphasis on corporate governance.
The survey also asked respondents to identify the greatest retirement plan governance challenges they expect to face in the next two years. The top two challenges were retirement benefit cost and regulatory complexity. Just over three-fourths (77%) placed retirement benefit costs among their top challenges, while slightly fewer (73%) cited regulatory complexity.
“Managing and governing retirement plans has become increasingly difficult and time-consuming for plan sponsors over the past few years, especially as costs have risen and regulations have grown more complex,” said David Speier, Towers Watson’s Benefits Advisory and Compliance Director. “Additionally, employers are growing concerned over many of the risks associated with their retirement plan governance. However, it appears that relatively few employers are proactively taking steps to address these concerns, particularly with respect to their defined contribution plans.”
Indeed, the survey findings revealed that more than 80% of defined benefit and defined contribution plan sponsors identified regulatory compliance and investment volatility as the top risks over the next two years. However, while a majority of respondents are very concerned with compliance, only one in four (26%) schedule regular compliance reviews.
“Unfortunately, it appears that most plan sponsors generally wait until compliance issues emerge rather than take action to avert them,” said Robyn Credico, a senior consultant with Towers Watson. “Employers can take proactive measures to deal with risk issues. By conducting more regular compliance reviews, for instance, employers can get ahead of concerns over regulatory complexity and vendor quality.”
About the Survey
The Towers Watson Survey, U.S. Retirement Plan Governance, Risk and Responses, was conducted during April and May 2011. A total of 245 U.S. employers representing a broad range of industry sectors participated in the survey. Eighty-one percent of respondents sponsor both defined benefit and defined contribution retirement plans. More details about the survey are available at towerswatson.com/governance-survey.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.