In the wake of recent lawsuits and court decisions, sound retirement plan governance has become more important than ever in protecting the fiduciary liability of plan sponsors.
The Towers Watson 2011 survey on qualified retirement plan governance finds that while most employers are concerned with compliance, many are not taking all the steps available to manage the financial, organizational and other risks created by ineffective plan governance. A sizable number of employers, however, are getting the message. These organizations understand the increasing challenges and complexities in managing retirement plans, and expect to focus more of their time and attention on governance.
The survey report, The New Governance Landscape, analyzes the retirement benefit plan governance practices (both DB and DC plans) of over 245 employers, representing a broad range of industries and sizes.
Key findings:
Four out of 10 employers expect to devote more time addressing retirement plan governance over the next two years.
Respondents expect the top governance challenges organizations face in the next two years to be retirement benefit costs (77%) and regulatory complexity (73%). The greatest risks are expected to be regulatory compliance, investment volatility and vendor service quality.
Only one in four plan sponsors (26%) conduct regular compliance reviews. The most common reasons for a review are anticipated new risks and a pending IRS or DOL audit.
Less than half of respondents regularly measure the effectiveness of retirement plan decisions with specific metrics. A surprisingly large number of employers do not use any metrics to measure the effectiveness of their decision making regarding their defined benefit (DB) plans (39%) and defined contribution (DC) plans (45%).
About half (51%) of respondents use a single committee for all retirement plan governance. The chief HR position (73%) and CFO (67%) are the most common governance committee members.
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