Important Information

THIS WEBSITE IS INTENDED FOR INSTITUTIONAL INVESTORS who are U.S. residents ONLY; not intended for access or distribution to retail investors.

 

In order to access the Capital Group U.S. Institutional website (the “Site”), please read the following information and affirm by clicking the accept button that you have read and understand the information provided.

 

You must attest that you meet the qualifications of an institutional investor as described herein and accept these Terms and Conditions in order to access the Site. Some content may require additional registration for access.

 

The Site is solely intended for U.S. residents who are institutional investors or are acting on behalf of an institutional investor who has agreed to these Terms and Conditions. Institutional investors include, but are not limited to any person acting on behalf of/any pension fund, financial intermediary, consultant, endowment and foundation, bank, savings and loan association, insurance company, investment company registered under the Investment Company Act of 1940, investment adviser registered with the U.S. Securities and Exchange Commission or under applicable state law, government entity, entity with total assets of at least $50 million, employee benefit or qualified retirement plan with at least 100 participants, defined contribution/benefit plan, and qualified client or purchaser as defined by the U.S. Securities and Exchange Commission. By agreeing to these Terms and Conditions you are affirming your understanding that the Site is not intended for retail investors, individual plan participants or others who may not possess the financial sophistication to independently understand the content nor should it be redistributed to such persons.

 

You understand that the Site does not constitute advice of any nature, including fiduciary investment advice by Capital Group or its associates.

 

The reference to “Capital Group” used herein includes The Capital Group Companies, Inc., and its affiliates.
Retirement Planning
Plan sponsors reveal their top concerns for 2023
Chris Anast
Client Relationship Manager

This article is part of our Retirement Plan Trends series, which explores issues affecting the retirement space.


What keeps defined contribution (DC) retirement plan sponsors awake at night? While improving participant outcomes and addressing retirement income needs are among their top priorities, sponsors say potential legislative changes, consolidation in the recordkeeping industry, market uncertainty, inflation, rising interest rates and litigation risk could all disrupt how they manage their plans over the next five years, a new Capital Group survey shows. Several sponsors also mentioned aging participants needing more advice. 


Top priorities for 2023


Capital Group surveyed 52 DC and defined benefit (DB) plan sponsors representing a variety of industries, asset levels and geographies (encompassing both public and private DC plans). About half of the sponsors oversee plans with assets of $5 billion or more. We also surveyed a sample of consultants to see how their priorities, recommendations and concerns compared to the plan sponsors we contacted.


DC plans: Top of the agenda for 2023 for most DC plans in the survey was improving participant outcomes, which for 52% of sponsors was among their top three choices. Participant engagement came next, followed by retirement income. The next-most popular choice was a tie between evaluating a target date series and conducting a participant demographic analysis.


DB plans: For DB plan sponsors, changes in regulatory or accounting requirements and interest rates were among frequently mentioned potential disruptors to their plans over the next five years, while their top priorities are implementing liability-driven investing, achieving fully funded status and addressing the impact of inflation.


DC plans’ top 3 priorities in the next 12 months

The chart displays defined contribution plan sponsors’ top three priorities for their plan in the next 12 months. The top priority was improving participant outcomes, cited by 52% of the respondents. The other priorities and percentages of respondents who cited them were: participant engagement, 44%; retirement income, 40%; evaluating your target-date series, 25%; participant demographic analysis, 25%; recordkeeper evaluation, 21%; recordkeeper search, 19%; emergency savings, 13%; fixed income, 13%; inflation protection, 12%; diversity, equity and inclusion evaluation, 12%; environmental, social and governance, 8%; custom target-date series, 8%; alternative investments in target-date series, 6%; alternative investment standalone, 2%.

Source: Capital Group. Note: DC plan sponsors were asked to name the top three priorities for their plans. Each bar shows the percentage of sponsors who included each topic among their choices. Totals may not reconcile due to rounding. Based on survey responses collected from July 13, 2022, to December 1, 2022.

Consultants and sponsors differ on plan design


Although DC plan sponsors identified improving participant outcomes as their top priority, some still eschew certain auto-savings features that many consultants we contacted recommended. This was evident from our separate survey of 11 consultants.


Among the key contrasts:


Contribution rates

The chart displays the average percentages of salary that DC plan participants contribute to their plans, based on responses from surveyed plan sponsors. The mean contribution level based on all responses is 8.98% of salary. Six percent of plan sponsors say their participants contribute an average of less than 5% of their salary to their plans. The remaining results are: 6% of sponsors say participants contribute an average of 5%; 8% say participants contribute an average of 6%; 19% say participants contribute an average of 7%; 10% say participants contribute an average of 8%; 12% say participants contribute an average of 9%; 14% say participants contribute an average of 10%; 8% say participants contribute an average of 11%; 6% say participants contribute an average of 12%; 4% say participants contribute an average of 13%; 4% say participants contribute an average of 14%; and 6% say participants contribute an average of 15%-plus.

Source: Capital Group. Totals may not reconcile due to rounding. Based on survey responses collected from July 13, 2022, to December 1, 2022.

 


With most retirement plan sponsors utilizing consultants and advisors to help them make decisions, the above outlines just some of the contrasts between advice and actual implementation in retirement plans. This was Capital Group’s first survey of the plan sponsor and consultant landscape, and we hope to continue to uncover these trends and strive to help plans better serve participants.


This is the most recent article in our Retirement Plan Trends series, which explores major issues affecting the institutional retirement space.


Our latest insights

Published on June 1, 2023

Chris Anast is a client relationship manager with 26 years of investment industry experience (as of 12/31/2024). He holds a bachelor's degree in finance from the University of Florida and holds the Chartered Financial Analyst® designation.

Learn more about
Retirement Planning
Defined Benefit
Plan Design
Participant Engagement
Retirement Income

Alternative investments are investments other than stocks, bonds and cash. Examples include commodities, real estate, hedge funds and private equity.

 

A custom target date series is one that a plan sponsor can customize for its participants by creating a glide path (asset allocation) tailored to the participant population and/or hiring particular investment managers to manage the underlying strategies.

 

A participant contribution rate is the percentage of a participant’s compensation that is invested periodically in a retirement account. 

 

A participant is an individual who is enrolled in a retirement plan.

Don’t miss out

Get the Capital Ideas newsletter in your inbox every other week

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.