Simplifying Plan Member ComplexityApr 4, 2019


As an industry, we have begun to broaden our attention from a singular focus on accumulating retirement savings to helping plan members replace income in retirement.

The problem is complex and, all too often, proposed solutions have been inflexible and otherwise unappealing for both plan sponsors and retiring employees.

This elusive quest for a “silver bullet” to solve the complex needs of all plan members is often leaving them with their hands tied.

We may be trying to over-solve the problem with this binary, “all-or-nothing” approach. If the retirement needs of each plan member are to be met, we need to engage them in the planning process for future retirement income streams.

Incremental steps and flexible tools can help empower employees today to structure better retirement outcomes.

The Rich Mosaic of Retirement Assets

No two plan members are the same; everyone has his or her own unique retirement needs and expectations for his or her DC plan, making it difficult to generalize. But within this complexity, there are certain basic truths that we ought to acknowledge so we can begin to act.

One common reality for most plan members is that the current employer plan is not expected to be the sole source, and sometimes not even the chief source, of retirement income. Many members have a variety of retirement assets accumulated from multiple employers over the course of their careers.

So the current plan balance is often only one tile in a mosaic of retirement assets, and members will draw on multiple sources of income in retirement. We ought to recognize and accept our role as temporary and partial stewards of plan members’ retirement assets, since their complete financial situations are unique and often effectively unknown to us. We don’t necessarily need to build complex solutions with elaborate models that set out to tackle the whole problem and lock members into a specific outcome. In our view, the tools we provide should be more like Lego® bricks: simple, compatible, and easy to build upon, with the ability to mix and match with other existing or future tools available in or outside of the plan.

Plan Member Needs Vary

Another reality is that there are certain subgroups of plan members with distinct behaviours and needs. Time until retirement is a particularly incisive segmentation point. Members who are beginning their careers need to save, while those nearing the end need to determine what and when to spend. The young typically desire high total return, while the older generally seek stability of returns to minimize unnecessary sequence risk.

While the success of automatic enrollment in DC plans might lead some to assume that we ought to focus on automated, “do-it-for-me” solutions for plan members, research suggests quite the opposite for the older demographic. In one of our own studies, 52% of older pre-retirees stated that they would prefer to self-manage investment allocations, while only 21% would prefer a managed product.1 Moreover, only 16% of older pre-retirees are actually invested in the plan’s default option; the vast majority has been proactive in choosing their investment allocations.2Targeted communication and guidance to this group could go a long way to help them prepare for the retirement transition.

Each plan member has a unique combination of savings history, current income, and future spending needs, making a one-size-fits-all approach practically impossible. This diversity becomes more pronounced as members grow older, making that demographic a tricky group to serve. Even with the best of intentions, one-size-fits-all solutions may end up fitting only a small number of members. Instead, members approaching retirement may benefit from purpose-built yet flexible tools to help empower them to transition to retirement in a way that satisfies their needs.

Exhibit 1

Cracking the Code on Member Complexity

Idealist intent and the drive for a perfect all-in-one retirement income solution may be keeping many plan sponsors from acting. And lessons learned about the difficulty of plan member education and the appeal of automation may have also discouraged us from focusing on exactly what may benefit members the most.

In our view, we as an industry need a shift in perspective – away from the futile quest for a solution that satisfies the retirement needs for every plan member, and toward a more proactive, practical approach to help enable members to make their current employer plan work for them in retirement. This approach should encompass everything we do –from communication strategies to in-plan tools – to help members situate their plan assets within the broader mosaic of their financial assets and future income streams. We should engage plan members, not side-step them, to achieve optimal retirement outcomes.


1,2. The In-plan Retirement Income Solutions (IRIS) Web Survey was a 15-minute online survey administered during March 2015. All respondents were working (full-time or part-time) or previously worked for a large employer (1,000 employees or more), with at least $100,000 in DC plan balances (including current or former plans). Respondents were comprised of 455 DC plan participants (49 of them retired), ages 50-80.