Sponsors Considering Inflation Protection Strategies

Nearly half of DC sponsors either offer or plan to soon offer some type of inflation protection strategy to their participants, according to the Mercer US Defined Contribution Investment Survey. 

Among the sponsors currently offering these strategies, a stand-alone Treasury Inflation Protection Securities (TIPS) is the most widely used option (24%) versus combining multiple asset classes (12%). Another 10% of sponsors intend to offer some type of strategy within the next year.   

Mercer also found 58% 233 plan sponsors polled have no intention of transitioning from mutual funds to other investment vehicles such as collective trusts and/or separate accounts.  For those sponsors who will be transitioning, 34% cited lower investment fees as the key rationale for the move.  

Of those respondents that offer fixed payout options, the majority of sponsors (80%) offer participants the option to purchase an annuity at retirement outside the plan. The payout of income is typically provided via a stand-alone investment option (59%).  

Although 50% of plans offer investment advice and/or managed accounts, usage among participants is very low. For investment advice, 68% of sponsors indicated usage is 10% or less and 71% of sponsors indicated that managed account usage is also 10% or less.