The Retirement Plan Solution: The Reinvention of Defined Contribution

Chapter 21. The Defined Contribution Plan Sponsor's Role in Decumulation

In most countries, defined contribution (DC) plan sponsors have no fiduciary responsibility to provide their participants with assistance in the decumulation phase of their retirement (beyond the basic fiduciary responsibilities they have to all participants, retired or not).^[177] However, as we learned in Chapter 4, 60 percent of the benefits paid out of a typical DC account could, if the benefit is taken in the form of a life income, come from investment earnings after retirement. So the risk to participants' wealth from financial mismanagement after retirement is real. What a waste for a plan sponsor to devote time, money, and energy to building a strong program for the working years of their employees, only to see the benefit that might have been achieved squandered through neglecting the postretirement years.

We have seen how many of the steps that can be—and are being—taken to improve the accumulation phase are steps that lean on the sponsor, and reduce the burden placed on the participants. If the system continues to regard the participants as being on their own for the decumulation phase, the principles behind those solutions cannot be applied also to that critical phase, and we will not end up with the better system that this book is devoted to.

In addition, even though there may be no fiduciary responsibility, there are business considerations that make it worthwhile for a sponsor to consider assisting ...