Most retirement plan executives at corporations that sponsor both defined benefit and defined contribution plans do not believe DC plans are adequate savings vehicles for retirement, according to a survey by Barclays Global Investors and Mathew Greenwald & Associates.
When asked what would improve the situation, 90% of respondents cited increased employee contribution rates; 61% cited improved participation rates; 54%, better education and communication; 47%, increased use of pre-mixed asset allocation funds; and 34%, increased availability of lower-cost institutional funds.
"Most DC plan sponsors are disappointed by inadequate participation and savings rates," Kristi Mitchem, head of U.S. defined contribution at BGI, said in an e-mail. "DC plans have historically underperformed DB plans by as much as 3% to 4%, and DC plan sponsors are now keenly aware of the importance of achieving DB investment quality in their DC plans."
The survey also found that lifecycle funds are popular among DC plan officials because they eliminate the need for active management by participants, automatically reducing risk as participants near retirement and reducing asset allocation mistakes.
The survey, conducted between May 22 and July 5, was given to 41 benefits managers, CFOs and human resources executives at corporate and state pension plans with $847 billion in total assets as of June 30.