Benefits executives at multinational corporations are seeking more centralized coordination of defined contribution plans due to DC's growing role in corporate retirement policies, according to a survey by Pacific Investment Management Co. LLC.
“Companies are becoming more involved than they have in the past,” said Stacy Schaus, executive vice president and defined contribution practice leader for Newport Beach, Calif.-based PIMCO, noting that the companies try to strike a balance between headquarters-based standards and the cultural or operational differences among various countries where they offer DC plans.
“Within a few years, the vast majority will have a global plan philosophy for oversight of benefits,” she said. “Defined contribution is becoming more important and more prevalent in international markets.”
A report on the survey, published Jan. 23, noted that 43% of multinational DC plans already have completed a written global retirement philosophy document, an important early effort in setting goals for multinational DC plans, Ms. Schaus said. Another 22% will achieve this goal within one to two years.
The survey report said 46% of multinational corporations have completed an inventory of local DC plans in countries where they do business. Ms. Schaus said this illustrates a “very first step” in corporations' understanding the differences among plans. Thirty-eight percent said they will achieve this goal within one to two years. “We hear many sponsors saying they're not sure what DC plans have done locally,” she said.
Among other key actions to improve global DC oversight, PIMCO found that 43% of companies had already established a global leadership team and 26% will do so in one to two years; 35% have reviewed global plan governance, and 43% will do so in one to two years; and 33% have evaluated the design of local DC plans, and 29% will do so in one to two years.
The PIMCO report, “Global DC Survey for Multinational Corporations, contains responses from executives at 26 corporations whose DC plans have more than $230 billion in assets covering more than 1.2 million participants.
The survey report cited several goals for establishing greater global oversight of DC plans, and executives said the most important was improving plan governance. Forty-two percent cited this as having significant value, while 29% said it would add value.
Twenty-five percent of executives said greater global oversight would provide significant value in reducing costs, while 46% said it would add value.
Another benefit to global retirement efforts is information sharing, which 29% of executives said would provide significant value and 33% said would provide value. Ms. Schaus said this could provide a systemwide benefit as DC plans in one country might be using practices that corporate executives find worthwhile for plans in other countries.