The DC Plan of the Future

The DC Plan of the Future

DC Principles for the DC Generation

The DC Plan of the Future

May 2016
Dan Smith   |   Head of Americas Asset Servicing
Rob Phillips   |   Consultant Relations, BNY Mellon Investment Management

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Estimates of the U.S. retirement market indicate that with a projected market value of over $8.5 trillion in 2018, DC plans will be larger than their DB equivalent by $1.3 trillion.1 However, even with the growing number of workers covered through such plans, there is mounting evidence suggesting that DC plan participants are not on track to sufficiently fund their goals.2

With retirement planning becoming a greater concern for baby boomers, generation X and even millennials, awareness of their particular concerns and what to do about them is an important consideration for plan sponsors.

Historical approaches to DC plans have generated decidedly mixed results, including an over-reliance on retail investment solutions, inability to integrate automation and education, and inefficiently priced products and services. As we look to the future, it is incumbent upon plan sponsors to gauge the impact of these macro industry trends on the operations of their individual retirement plans.

To provide context to this issue, BNY Mellon sponsored research that involved in-depth interviews with some of the leading DC plan sponsors in the U.S. The interviews gathered insight as to how these organizations are responding to the evolutionary sea-change underway, and what best practices were being utilized to increase the efficiency of their plans. Although observations were made on a broad range of topics, a number of common themes or best practices emerged from the interviews:

  • Leveraging institutional investment strategies, or the “institutionalization” of DC
  • Ensuring that education and automation work together
  • Pursuing greater transparency in the pricing model

This paper explores each of these topics in-depth:

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1 Source – Cerulli Associates, The Cerulli Report - Retirement Markets 2015: Growth Opportunities in Maturing Markets

2 Source - Employee Benefit Research Institute Retirement Confidence Survey www.ebri.org/surveys/rcs/2015 – 2015 RCI noted that 28% of respondents that had some kind of retirement plan were either not too confident or not confident at all that they would have enough money live comfortably through retirement

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