2012 Hot Topics in Retirement - Aon

Enhanced Automation and
Individualized Solutions Viewed as Key
Employers Taking a More Holistic View
Looking Ahead
As defined contribution plans now serve as the main retirement vehicle for
many current and most future employees, automation is a proven solution to
help employees get on the right path to retirement. However, if not implemented
in the right way, the long-term costs to employees will be high. When considering
plan design and automation tactics, plan sponsors’ focus needs to expand to
include overall retirement readiness. By addressing issues such as how to better
include existing nonparticipants, how to incorporate stronger default elections,
and how to provide better support of the decumulation phase, plan sponsors
will greatly enhance the benefit derived from the plan—by both the employees
and the employer.
Further, we cannot forget about the majority of employees in the defined
contribution system who have not been subject to defaults—non-savers, those
who opted out, or participants who entered the plan prior to automation.
The concept of designing plans in a way that e�ectively balances simplicity
with enough depth and diversity is critical to ensure broad employee success.
Automatic enrollment and defaults address these challenges for the “average”
employee. However, we know that individuals, especially as they near
retirement, are increasingly heterogeneous and require more individualized
solutions. While improvements have been made, enhancements and additional
tools can help drive individual success.
Plan sponsors have the opportunity to leverage an increasing array of services
and support to assist them in designing, managing, and communicating their
retirement plans. A more holistic perspective is a necessity in reviewing
retirement programs by looking at measures such as retirement income
adequacy instead of just participation and savings levels. Through this
expanded view, employers can better assess the value of the plan design and
also communicate in a way that will resonate with employees.
The retirement system requires continuous examination and innovation to
ensure secure retirements for Americans. Many plan sponsors have recently
adjusted their defined benefit and/or defined contribution programs, but
this is an ongoing process. Retirement program success necessitates the
iterative process of identifying needs, implementing and embracing
innovative solutions, and measuring outcomes—and then making logical
adjustments as additional experience is accumulated.
The remainder of this summary reviews the key themes in each plan
design area, followed by perspectives on the current state of the retirement
marketplace.
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