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CCH® PENSION — 02/04/11

Mercer unveils "top 10" resolutions for DC plan sponsors

Mercer has issued its "10 for 2011" checklist of New Year's resolutions that defined contribution (DC) plan sponsors should make now to address investment, plan-design and fiduciary concerns.

"Over the past several years, there has been greater policy attention and regulatory scrutiny around DC plans as these become the sole retirement vehicle for many Americans," said Amy Reynolds, Partner in Mercer's Retirement, Risk and Finance business. "Plan sponsors are continuing to evaluate Roth options and other low cost design features while evaluating the impact of recent automation trends. We foresee that 2011 is going to continue to be a challenging year as new disclosure rules will be a key area of focus for sponsors and their record keepers. Looking forward, we expect continued focus by participants and regulators on defined contribution plans. Sponsors need to stay abreast of changes and trends, and respond appropriately."

Mercer's "10 for 2011" list

The items on Mercer's "10 for 2011" list include the following:

(1) Participant Fee Disclosure --New rules are coming in 2012, Mercer says. "Determine what's required, who's responsible and how to integrate the new     requirements with other plan communications."
(2) Fee Oversight --Mercer recommends establishing a policy for ongoing fee benchmarking.
(3) Stable Value Wrap Contracts --Mercer notes that a joint study by Federal regulatory agencies, due to be completed by October 2011, will determine whether stable value wrap contracts are exempt from the swap restrictions of Title VII of the Wall Street Reform and Consumer Protection Act.
(4) Inflation Hedge Option --Plan sponsors are advised to consider adding a diversified inflation hedge option to their fund lineup, since near-retirees benefit the most from inflation hedging options. Mercer recommends evaluating a diversified option versus a Treasury Inflation-Protected Securities (TIPS) option.
(5) Retirement Income Solutions --New retirement income products and modeling tools continue to hit the market, Mercer notes. Plan sponsors need to understand the available solutions to determine if one or more are appropriate for their demographics.
(6) Participants Nearing Retirement --With investment performance being critical for near-retirees, Mercer recommends evaluating whether their investment strategies match expected spend-down needs.
(7) Roth 401(k) Contributions --A low-cost plan enhancement, such as a Roth, would provide financial opportunities for participants in a difficult economic climate.
(8) Managed Accounts and/or Investment Advice --Sponsors should determine whether they should offer participants advice or managed accounts (or both) and/or whether they should take advantage of improved access to custom target date funds.
(9) Auto Features --"Set it and forget it" doesn't work for plan sponsors, Mercer says. Sponsors need to ask whether auto-enrollment contribution rates should be increased and whether vesting and withdrawal provisions are still appropriate for their organization.
(10) Plan Operations --Mercer notes that the IRS and Labor Department are focusing on defined contribution plan compliance and recommend periodic review of plan operations both against the terms of the plan and against governmental requirements.

Source: Mercer press release, January 13, 2011.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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