DC plan sponsors taking more responsibility for employees' retirement income

Employers offering defined-contribution plans to their workers are broadening their focus on financial well-being, according to a poll from J.P. Morgan Asset Management.

DC plan sponsors are especially keen to ensure that their employees are well-placed to enjoy adequate retirement income, with 9 out of 10 respondents saying they "strongly agree" or "somewhat agree" that it is important to offer investments that help participants generate income in retirement.

Six out of 10 believe that DC plans should be a vehicle to generate retirement income, and among those that do not currently offer this option 45% are considering doing so within the year. Those who do offer a retirement income option are more likely to say that their plan meets employees’ financial goals compared with those that do not.  

Generally, there has been a sharp increase in plan sponsors feeling a strong sense of responsibility for their employees’ financial well-being — 85% said so in 2023 compared to 59% a decade ago.

Apart from retirement income, more than seven out of 10 respondents said they offer life insurance, six out of 10 offer disability insurance and mental health benefits, half make health savings accounts available, and just under half provide paid parental or caregiving leave.

[Read more: Can I rely solely on Social Security for retirement income?]

Student loan debt assistance is offered by 40% of poll participants, with a similar share offering one-off help such as debt coaching.

“It's exciting to see that companies offering these types of programs see their retirement plans as more effective," said Alexandra Nobile, vice president of retirement insights at J.P. Morgan Asset Management. "The implications of SECURE 2.0 serve to only accelerate this trend and we expect to see more plan sponsors taking a proactive approach to evolving their retirement benefit offering through innovative DC plan design." 

OTHER FINDINGS

To help provide employees with a more rounded DC plan, sponsors are taking a proactive approach to plan design.

Among the survey’s other findings:

• 43% of surveyed sponsors report automatic contribution escalation, up from 21% in 2013, but 6% are unsure if they offer this.
• 6 in 10 plan sponsors offer a target-date fund in their DC plan, while 76% of sponsors with a qualified default investment alternative say it is a series of target-date funds.
• Only 55% of surveyed sponsors know that they serve as a fiduciary, despite the fact that all of the respondents have fiduciary responsibilities.

"Our research shows that DC plans have become the primary retirement savings vehicle for most working Americans, and in many ways plan sponsors have risen to the occasion, however there is a clear need for plan sponsors to better understand their role as a fiduciary, with just under half aware of their responsibilities," Catherine Peterson, global head of insights and product marketing at J.P. Morgan Asset & Wealth Management, said in a statement. "We expect to see a continued emphasis on incorporating retirement income solutions into DC plans going forward having been identified by plan sponsors as a core purpose of plans."