In the defined contribution arena, the new year is expected to be one of financial wellness as plan executives look for ways to educate participants and evaluate their retirement readiness based on more than just their 401(k) or other DC plan accounts.
DC consultants say this broader view of financial health is something plan executives can do without waiting for Congress to act. The challenge, they say, is developing effective communications as well as ways to measure the success of encouraging participants to plan for the future.
“There will be an accelerated pace of financial wellness as plan sponsors think in a more holistic way,” said Alison Borland, vice president of retirement strategy and solutions for Aon Hewitt, Lincolnshire, Ill. “Much more energy will be focused on education and communication.”
Previously, sponsors said participants' overall financial wellness — such as health-care spending, Social Security and taxable savings — “was not really their responsibility,” she said. “That has changed. There's a dramatic shift in sponsors' attitudes.”
Now, sponsors are offering more seminars, more access to financial advice and more web-based methods for participants to assess how all aspects of their lives prepare them for an adequate retirement, she said.
“We anticipate an elevated focus on retirement readiness for DC participants and how sponsors evaluate the success of DC plans,” said Lorie Latham, a Chicago-based director at Towers Watson & Co. She added that providers and sponsors will devote more attention to ways “to evaluate successful retirement outcomes and sufficient income replacement ratios.”
In recent years, executives of the DC plan clients of Martin Schmidt have devoted most of their attention to health-care issues. “Now, they are moving more to a greater consideration and greater interest in holistic financial well-being,” said Mr. Schmidt, principal and client services director at HS2 Solutions, Chicago, a retirement plan and technology consulting firm. Clients are integrating evaluations of health-care costs with retirement balances and other income sources, as well as using web-based systems to help participants calculate their spending strategies in retirement, he said.