Experts Predict a New Standard for DC Plan Design

Ninety-five percent of retirement plan experts foresee 55% of plan sponsors automatically enrolling participants by 2019, according to Transamerica Retirement Solutions’ “Prescience 2019: Expert Opinions of the Future of Retirement Plans.” The report is based on the opinions of 62 experts, including Quinn Keeler, senior vice president, research and surveys, Asset International.

Seventy-four percent say that 45% of sponsors will default participants into their plans at 6% or higher, 79% believe nearly all retirement plan providers will send participants alerts about their state of retirement readiness, and 92% anticipate that providers will show participants whether they are on course to reach a funded retirement.

“While plan sponsors are still focused on increasing participation in retirement plans by their employees, they are also looking for ways to increase contribution rates participants need to achieve a successful retirement,” says Wendy Daniels, senior vice president of retirement marketing for Transamerica Retirement Solutions. “And an expanded and more sophisticated use of mobile applications will help overcome communications challenges brought on by an increasingly dispersed workplace, and also help participants manage their retirement funds more effectively.”

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Eighty-six percent of the experts think the number of home-based and mobile employees will rise 20% to 18 million by 2019, prompting 86% of the experts to believe nearly all retirement plan providers will offer apps and increased functionality for mobile devices.

The experts also foresee total retirement assets growing 40% to $35 trillion over the next four years, and 75% of small employers, i.e. those with 50 to 100 employees, will offer retirement plans.

As the report says, “Retirement plan industry experts point out that plan sponsors are increasingly going beyond the call of duty when evaluating their advisers and service providers—switching from satisfactory service to plan-level success metrics now and participants-level retirement outcomes by 2019. Prompted by plan-level retirement readiness reports, by 2019, more than half of plan sponsors will have taken meaningful action to alter plan design in order to improve the retirement readiness of participants. But perhaps the most impactful action plan sponsors will take is altering plan design to automatically enroll participants into the plan at higher contribution rates and higher automatic deferral increases.”

The full report can be downloaded here.