Multinational corporations, expanding their use of defined contribution plans across the globe, face challenges in balancing the need for control of plans from headquarters with catering to the needs of local populations, a new survey by Pacific Investment Management Co. LLC finds.
“Every market has different rules, customs and preferences,” said Stacy Schaus, executive vice president and defined contribution practice leader for Newport Beach, Calif.-based PIMCO. “You need global oversight, but you also need on-the-ground ability to develop plans and to make sure the plans are locally competitive.”
In its first-ever survey of multinational companies, to be released Dec. 28, PIMCO found a diversity of strategies for managing DC plans in multiple countries. For example, 27% of respondents said they had a DC plan leader for each country; 23% said they had a global DC leader; and 19% said they had a DC leader for each region. Another 31% offered a mixture of responses ranging from a hybrid of the above answers to not having a specific global DC leader.
“It depends on what countries they are in, how big they are in the countries” and on local customs and practices, Ms. Schaus said.
Among the DC plan executives interviewed, 37% said they had a written global retirement plan philosophy, while 22% said they don't have a written philosophy and are unlikely to have one.
Another 22% said they don't have one, but “plan to write one in the next few years,” said a report on the survey results. An additional 7% said they would write one within a year.
“I find it surprising that more than one-third do have a written retirement plan philosophy,” Ms. Schaus said. “They are just beginning to get their arms around this. And in the next few years, about two-thirds will have one.”
Corporate governance played a prominent role in the PIMCO survey, which covered 27 companies with combined DC assets of more than $150 billion and whose plans serve a total of more than 850,000 participants.
For example, when asked what has helped their company manage small DC plans in multiple markets, 66% cited corporate governance as either “most helpful” or “helpful” — well above other responses.
And when asked what global DC oversight actions executives might take in the next few years, reviewing corporate governance ranked first with 38% of respondents. Other top answers included evaluating providers (17%), considering global pooling of assets (17%) and reviewing investment offerings and local DC plan design (13%).
Ms. Schaus said the 38% figure is significant because it shows plan executives believe they need a better grasp of disparate plans. “Often plans will start at the markets with local vendors,” she said. “There isn't necessarily an awareness at headquarters of what is being made available country by country.”
The survey report also noted:
• Fifty-two percent of respondents described their DC plan governance structure as having global/regional teams setting plan “broad parameters of design for local plans to follow,” while 28% said each country/local business unit operates independently. Also, 8% said global/regional teams set all local plan benefit designs centrally, and 12% offered other responses.
• Simplifying investment menus was the most cited by plan executives (48%) as the top investment objective, followed by diversifying investment assets for multiple economic cycles (44%) and outperforming benchmarks and peer groups (36%). Plan executives could select up to three choices.
• Attracting and retaining talent was mentioned by 50% as the top return on investment for offering retirement benefits, followed by “a sense of doing what's right” (25%).
