DCIIA Publishes Resource for Introducing a Retirement Tier in DC Plans

The Defined Contribution Institutional Investment Association has published a white paper series, “Design Matters: The Retirement Tier,” to help plan sponsors better understand how to incorporate a retirement tier into their defined contribution plan and how such a tier would benefit participants.

The series addresses the reality that the demographic shift driven by Baby Boomer retirements will significantly change the focus of DC plans. By 2030, an estimated 73 million Baby Boomers will be age 65 or older. That means that DC plans could see their participant population have more retirees and non-working participants than active employees, DCIIA wrote in a July report about their white paper series.

DCIIA’s research stresses the importance of engaging participants in a plan’s retirement tier. “Participants need to understand how they can potentially benefit from retirement tier offerings to consider using them,” DCIIA says in a paper summarizing the white paper series.

The association goes on to offer advice about how best to communicate with participants about the retirement tier. “Whatever form the retirement tier takes within a plan, sponsors must clearly inform participants about offered products, solutions, tools, and services,” DCIIA says.

In addition, DCIIA stresses the importance of reviewing and possibly updating the plan’s Investment Policy Statement. “The goal of the plan may need to be revisited and refocused on sustainable, predictable retirement income rather than a wealth or accumulation goal,” says DCIIA. “Defining the plan as either a saving or retirement offering matters and has very important investment, service and communication implications.”

DCIIA’s paper offers the following suggestions for requests for proposals and vendor evaluations to help gauge potential service providers’ support for a retirement tier:

• Request existing materials, case studies, and sample work that demonstrates how they typically support plan sponsors.
• Ask if (and how) they customize communications. If unique and targeted correspondence with participants is considered important, find out how much customization is available and what resources the plan might need to contribute to help create it.
• Ask service providers if they can fully support the plan’s needs or would require help, such as support from within the plan sponsor’s organization (e.g., using resources from internal communications). Will external communications specialists need to be hired?
• Ask how they ensure successful rollouts and what kind of ongoing support they provide.

DCIIA also advises that plan sponsors contemplate how a retirement tier would fit the organization’s strategic plans for workforce planning, HR, and benefits.

Overall, DCIIA’s paper advises plan sponsors to work with their service providers to identify and target various participant demographics with messaging about a retirement tier to better design its offerings and the plan’s communications to different age groups. “Consider working with service providers to create personas to help better understand the plan’s participant population, their needs, key messaging, and the various ways to reach different audiences,” the paper says.

The key contributor to the paper is Megan Yost, of Segal Benz. The other contributors are Glenn Dial, of American Century Investments; Heather Ross, of Caldwell Ross Communications, Inc.; Toni Brown, of Capital Group; Shawn O’Brien, of Cerulli Associates; Peggy Flynn, of Con Edison; Steve Dufault, from Fiducient Advisors; Drew Carrington, of Franklin Templeton’ and Pam Krueger, with WealthRamp.