The Value of Detailed Plan Analytics

“Defined contribution [DC] retirement plan sponsors can strengthen their plan governance and improve their plan’s return on investment [ROI] by using detailed analytics that evaluate specific segments of their employee population, based on age, job category, tenure and benefit structure,” says a recent Willis Towers Watson “Insights.”

In fact, its research suggests that using the right analytics can pinpoint the employees and groups most at risk, enabling the plan sponsor to then custom-select tools and strategies to help them improve their retirement saving.

The paper points to good intentions yet to be realized: 83% of respondents to the firm’s 2017 DC Plan Sponsor Survey cited retirement readiness as a top priority, yet just 17% said they allocate time to discuss the subject in committee meetings, focusing instead on evaluating investment managers and monitoring fund performance. “Only one-third of DC plan committees analyze retirement readiness annually, and less than half assess readiness at least every three years,” it says.

The lack of specific information that can be useful for setting improvement goals only compounds the situation, the report notes.

“We believe plan-wide statistics on mean or median participation rates, balances or contribution rates measure aggregate data on all participants, but offer little insight into retirement adequacy and meaningful benchmarks for individuals or population segments,” the paper says.

Having use of the proper detailed analytics, though, should enable plan sponsors to “develop objectives and an overall plan strategy that fosters retirement readiness in two key ways,” it concludes. “The first considers steps plan sponsors can take on their own through plan design to establish participation, saving and investment. The second looks at the tactics used to motivate participants to take financial action, including improving behaviors to increase savings, tax efficiency, investing and spending.”