Employees challenged by more investment options in DC plans
Canadian employers that sponsor defined contribution (DC) or capital accumulation plans (CAPs) are worried employees don’t understand their choices under the plan in spite of concerted communications efforts, according to Buck Consultants.
Moving Forward — An Overview of Capital Accumulation Plans in Canada found three-quarters (74 per cent) of 150 CAP sponsors think members are confused about investment options.
The number is surprising, says Peter Arnold, Buck’s national practice leader for investment and DC consulting in Canada, since 81 per cent have a formal communications strategy.
The survey found 57 per cent of sponsors offer more than 10 investment choices, a significant increase from the 2003 survey, when only 40 per cent offered that many.
“The more options you give employees, the less likely they are to actually make informed choices, and that can fuel investment ‘by default,’” said Arnold. “Many plan sponsors are struggling with the issue of the default fund, since this choice, which is fiduciary in nature, could put them at risk in the future.”
Many well-run CAPs are taking a less-is-more approach to help employees get through the investment maze, said Arnold. “Fewer investment options, more delegation of responsibilities to service providers and a better understanding of employee investment patterns are the new priorities for sponsors.”
Other top concerns include: governance and compliance issues (68%); benefit adequacy (68%); employee satisfaction (66%) and cost containment (64%).
