Ten years is a long time—and in the decade since the passage ofthe Pension Protection Act, defined-contribution plans have changedsubstantially in structure even as the part they play in Americans'retirement has also changed—from a supporting role to the mainact.

Now that DC plans have stepped up from being a supplementalsavings vehicle to being the primary retirement savings vehiclemany employees rely on, a Willis Towers Watson paper has analyzed DCplans with an eye toward seeing how well they have done at keepingup with the transformation.

In so doing, WTW has identified five steps plan sponsors can useto “get back to the basics” by reevaluating existing governancestructures and processes currently in place in their plans,followed by five steps sponsors should take to help their plans get“back to the future,” using best practices to make sure planscontinue to evolve. Here they are below.

10. Ensure your governance structure reflects retirement planobjectives.

As retirement plans change and become increasingly complex, WTWsays that historical governance structures may no longer besufficient. It recommends determining the appropriate internal andexternal people involved and the amount of time needed to commit tothe review.

In addition, it suggests that merging investment andadministrative committees to create a single body could be a way toget maximum flexibility to address benefit needs and increase thelikelihood of successful retirement outcomes for participants.Subcommittees can be delegated to handle specific activities.

9. Delegate decisions to make better use of internal governancepeople.

Pointing to optimal governance as critical for successful DCplan management, WTW suggests that internal people can be deployedmore efficiently when some tasks are delegated to an externalpartner.

Perhaps activities such as manager selection or administrativeoperations, could be outsourced so that more committee time couldbe devoted to strategic decisions such as plan design orcommunication strategy.

In addition, by delegating investment decisions, sponsorsbenefit from another provider taking on fiduciary responsibilityalongside the committee.

8. Set strategic objectives for your committee and establishmetrics for measuring success.

To make effective decisions, a committee must have clearlydefined beliefs, goals and objectives. For example, howpaternalistic does your committee wish to be?

Conduct an investment beliefs survey of your committee, discussobjectives and document the outcomes. Then consider benchmarkingplans to achieve goals such as maximizing retirement readinessoutcomes, and evaluating what to do to achieve those goals.

7. Establish/enhance your process for reviewing plan fees.

Fiduciary risk is on the rise, with increasing numbers oflawsuits aimed at DC plan sponsors—most of them including claims ofexcessive fees paid for investment management and/or administrativeservices.

Sponsors should have appropriate processes to keep on top of allfees their plans pay, with periodic monitoring to assess that allplan fees are reasonable.

6. Update your policy documents.

Most investment committees have an investment policy statementin place, but have not realized that if the documents are notstructured properly, they can actually increase risk.

WTW points out that policy documents can be used againstfiduciaries during litigation if not followed precisely, andrecommends rewriting documents to avoid overly prescriptivelanguage that dictates what a committee “should,” “must” or “shall”do in a given circumstance.

In addition, it recommends that sponsors consider establishing adistinct fee policy statement that addresses the process forallocating and reviewing plan fees.

5. Learn about the latest auto features.

While auto-enrollment and auto-escalaation features are in fargreater use than they were 10 years ago, when the PPA was passed,that doesn't mean they're perfect.

Next-generation auto features include extended match structures,custom default rates based on age, and auto-enrollment to Rothinstead of pretax contributions.

Plan sponsors need to evaluate auto features to see which willbest satisfy their own plan objectives, particularly since someauto features could actually stand in the way of achieving thoseobjectives.

4. Develop an engagement strategy to change participantbehaviors.

Dealing with the differing needs of the five generationscurrently in the workforce makes it more difficult, and moreimportant than ever, to engage with participants.

Traditional broad-based, nontargeted engagement strategies areno longer appropriate.

In 2017, best practices involve smarter communications that useup-to-date knowledge of participant behavior and financialdecisionmaking. Communications should be outcome-focused andgenerationally targeted.

3. Consider alternative default investment options.

Target-date funds, which accounted for 46 percent of DCcontributions in 2015, are still the dominant qualified defaultinvestment alternative, with tremendous asset inflows in recentyears.

However, it's vital for sponsors to review how appropriate theirfunds are.

To do so, they should follow U.S. Department of Labor guidanceto review their TDF glide path, and also consider customsolutions.

WTW suggests in particular that sponsors consider hybrid QDIAsolutions that combine TDFs with managed accounts for differentparticipant groups.

2. Evaluate lifetime income solutions.

With participants looking for ways to turn their plan savingsinto lifetime income, the lifetime income solution landscape isevolving—and plan sponsors are beginning to incorporate options tohelp employees improve their financial security in retirement.

While participant demand for these solutions hasn't quite takenoff yet, WTW believes that longer life spans and historically lowrates of return on retirement savings causing longevity risks tospike will change that.

Sponsors need to keep themselves educated on current offeringsand to press for more robust solutions in the future.

1. Safeguard your participant data.

Hacking intrusions are becoming ever more common, and a primetarget is participants' benefit plan data.

In addition to your enterprisewide security measures, you alsoneed to know whether your recordkeeper is contractually obligatedto protect you and your participants, and also review your own andyour recordkeeper's insurance coverage.