July 05, 2012
--- Identifying a plan sponsor’s objectives for a defined
contribution (DC) plan should drive the investment consulting process.
Objectives should be specific,
achievable and within the control or influence of the plan sponsor, according
to a report from Towers Watson. The role or purpose of the DC plan within the
plan sponsor’s overall total rewards benefit offering should be of primary
consideration in identifying goals and objectives. The report noted that plans
designed to maximize a participant’s retirement savings and investment success
will look much different from plans designed exclusively to meet minimum legal
and regulatory requirements.
Participant investment behaviors,
needs and risks must also be considered when designing the investment
structure. “With individual direction of investment decisions, DC plans have
material implementation challenges that, if not recognized and addressed, can
unravel even well-designed investment structures,” the report said.
Watson said successful identification and awareness of governance capabilities
should determine the relative complexity of the investment structure and
manager implementation. The likelihood of meeting investment goals is directly
related to the governance budget employed. Complex investment structures and/or
strategies require plan sponsors to develop more effective decisionmaking