Transitioning from DB to DC: What You Need to Know

Bella FonsecaDecember 29, 2021December 29, 2021

In my years compiling benchmarking data for the International Foundation, one of the most notable trends has been the decreasing prevalence of employer-sponsored defined benefit (DB) pension plans. In the 2011 Employee Benefits Survey, 57% of responding organizations offered a DB pension plan. By 2020, that figure had fallen to 40%, driven primarily by a decrease from corporate/single-employer respondents (from 35% in 2011 to 19% in 2020).

The transition from DB pension plans to DC options may require participants to become more informed about their retirement decisions. Given this trend, it is becoming increasingly important to offer a variety of financial/retirement planning benefits to ensure that your plan participants are making informed decisions to ensure adequate retirement security.

In the 2020 edition of the Employee Benefits Survey, respondents were asked about which of these benefits they offer to their workers. The data is based on responses from 611 single employers/corporations, public employer plans, and multiemployer trust funds. More than four in five responding organizations (81%) offer at least one financial/retirement planning benefit.

About three in five responding organizations (56%) offer retirement calculators, which provide an estimate of how current contribution levels compare to established goals at retirement. These benefits are more commonly found among public employer respondents (62%).
A similar proportion provide education initiatives to enhance worker understanding of retirement/financial issues (56%), a benefit also more commonly offered among public employer respondents (64%)
More than half of responding organizations (50%) offer communication initiatives geared toward getting workers to participate more in plans. Corporate/single employer plans are the most likely to offer these communication initiatives (57%).
Similar proportions offer planning/counseling services specific to worker retirement (47%), as well as general finances (40%). Again, respondents in the public sector are most commonly offering these services (68% and 49% respectively).
About three in ten (29%) respondents offer targeted communication regarding retirement/finances to different generations in the workforce. Obviously, the needs of workers in the Baby Boomer generation differ from those in Generation X, Y or Z.
Organizations also commonly target communication efforts around different life events (26%). These targeted events can include the birth of a child, purchasing a home, marriage, or a worker nearing retirement.
Similar proportions offer services around the management of worker debt. More than one in ten (13%) offer credit counseling services, while 12% offer access to debt management programs.
A small proportion of responding organizations offer a phased retirement program (5%). These arrangements (either formal or informal) allow a worker at or near retirement to gradually move from full-time work to full-time retirement and can ease the burden of low retirement plan balances.
An even smaller group of respondents offer employer-sponsored emergency savings accounts (2%). Though rare, these programs can help workers set money aside for the unexpected. Some organizations even provide a small amount of seed money when accounts are established.

Looking for updated benchmarking data in the arena of employer-sponsored financial education initiatives? Watch your email inbox for an invitation to our survey on workplace wellness and financial education initiatives. You can also participate here. Benchmark your organization’s financial education efforts against your peers in the U.S. and Canada.