Employers worldwide anticipate spending more time and money on defined contribution plans as they make the transition from defined benefit plans, said a report from Vanguard Group released Tuesday.
“While DB plans will continue to require significant oversight, plan sponsors also expect more resources will need to be spent on DC plans in the future,” the report said. “This reflects the expectation that DC will become more prevalent with the number of plans increasing, along with the number of participants and assets.”
“On average, 58% of time, resources and effort is spent on DB plans compared with 38% on DC,” said the report representing web-based or phone-based interviews with 91 multinational employers with combined retirement assets of more than $650 billion. Most employers had both DB and DC plans.
The figure for DB plans rose to 71% for non-U.S. respondents, the report said.
Jean Young, senior research analyst for Vanguard’s Center for Retirement Research, said in an interview that over the next five years, the difference in employers’ expectations about devoting more time and resources to DC plans vs. DB plans is substantial.
For example, Ms. Young said, the survey found that 4% of respondents said they would spend “significantly” more time and resources on DB plans than they do now, and 18% said they would spend “somewhat” more time and resources.
By contrast, 10% said they would spend “significantly” more time and resources on DC plans, while 53% said they would spend “somewhat” more time and resources.
The Vanguard survey also found that: 66% of employers prefer to use a target-date fund as their DC plan’s default option. In addition, 57% of respondents prefer to use a mixture of active and passive strategies in their default funds, while 38% percent prefer all passive and 5% prefer all active.
