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Contact: Mercer Feedback

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United States
New York , 21 July 2010

US sponsors of defined contribution (DC) plans are focused on responding to Department of Labor and Internal Revenue Service activities, finds a new Mercer survey of more than 260 DC plan sponsors.

“Managing DC retirement plans has become more and more of a challenge for plan sponsors,” said Amy Reynolds, Partner in Mercer’s DC plan retirement consulting business.

“DC plans were originally intended as supplemental savings vehicles to complement traditional defined benefit pension plans,” said Ms. Reynolds. “But today DC plans are the ongoing and primary employer-sponsored retirement plan for most Americans and are therefore under much more intense scrutiny. Employers are prioritizing their resources to respond to increased fiduciary concerns, regulatory activity and governance requirements, with less focus on participants’ retirement savings.”

In response to increased Department of Labor and IRS audit and enforcement activities, nearly 60% of plan sponsors surveyed by Mercer said they intend to take some kind of action in the next 12 months. These respondents said they intend to take the following actions (respondents could select more than one action):

 65% plan to conduct an internal review of plan operations;
 27% intend to engage their vendor to review administration; and
 22% will conduct an independent operational compliance review. 

Pending fee-disclosure rules will increase information available to participants regarding fees. In preparation, 60% of plan sponsors indicate they will take some kind of action, as follows (again, more than one response was permitted):

 53% will conduct an administrative fee benchmarking study;
 28% will reevaluate who (participant or employer) pays administrative fees; and
 21% will change from a nontransparent bundled pricing arrangement to a transparent, fixed administrative fee pricing arrangement.

To help plan sponsors in the oversight of their DC plans, Mercer has developed a new service offering. Mercer’s DC Fiduciary FrameWork™ brings a best practice strategy to the oversight of all key areas – governance, investments, design, compliance, communication and vendor management.

Other findings include:

 77% of plan sponsors intend to maintain their current level of employer contributions, despite the negative impact the market downturn has had on participant accounts;
 45% of plan sponsors are considering adding some type of annuity option or minimum withdrawal benefit to their DC plan, reflecting a growing interest in helping participants manage the distribution phase of retirement; and
 25% of respondents intend to add investment advice in response to finalized Labor Department rules.

More information can be found online at Mercer.com or from a Mercer retirement consultant.

About the Survey
More than 260 organizations responded to this latest installment in Mercer’s ongoing “Quick Survey” series. One-third of the respondents (32%) have from 1,000 to 4,999 participants, while 47% have 5,000 or more participants; 36% have assets in excess of $500 million, while 31% have assets from $100 million to just under $500 million.

Mercer’s “Quick Survey” on DC plans is one of many surveys Mercer conducts on a regular basis to collect benchmarking information that will help clients understand market conditions. Through these brief, internet-based surveys, Mercer solicits input from the plan sponsor community regarding current issues with defined contribution plans. In exchange for participating, Mercer shares a summary of the survey results with respondents.

About Mercer
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit www.mercer.com.

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Contact: Mercer Feedback