(Photo: Shutterstock)

Defined contribution plans could use some work from plan sponsors, according to a new report from Willis Towers Watson, specificallyin the areas of financial well-being, investments andcompliance, if they're going to be the most help to employees in2020 and the years to come.

According to the report, while plan assets are definitely on therise—having risen "about 90 percent between 2007 and mid-2019," andare projected to continue to increase—plans themselves need an assist if they're toprovide the greatest benefit to participants.

1. Design plans to address employee financialstress

When it comes to financial well-being, the report says,employers need to evaluate the level of financial stress underwhich their employees are working. If they don't know the areasgiving workers the most trouble, they aren't properly equipped tohelp out in ways that will be of the most help.

They also need to consider providing the tools and evenfinancial coaching that will enable employees to make betterdecisions and achieve their goals. Tools that nudge them toward theright decisions, rather than decreeing objectives that may beunobtainable, and coaching that doesn't "judge" employee choicescan help guide them toward better—and moreachievable—objectives.

In addition, changes to the design of the plan itself that canprovide a side account, perhaps, for rainy-day funds and that backit up with auto-deductions to take the effort out of saving, aswell as provisions that can help with student loan debt—a commonthreat to retirement saving—can make retirement goals morerealistic and help employees stick with a plan.

2. Diversify assets

The investments in retirement plans need to work harder as well,says the report, particularly since the overly optimisticprojections of years gone by are both unrealistic and unachievabletoday. The report suggests the use of more diversified assets, suchas "direct real estate, public equity and hedge funds," perhapscontained within target-date funds, "to unlock potentially superiorinvestment returns."

Plans must be sustainable, with contained costs—perhaps throughlower-cost institutional portfolio management—and with changesengineered to be "the most sustainable for employees in all stagesof life." Particularly since employers are now encouraging workersto leave their retirement plan assets in place after retirement,there has to be a benefit for them to do so.

3. Get compliance assistance

When it comes to compliance, hiring an outsourced chiefinvestment officer to deal with the complexities of investments,the need to satisfy fiduciary standards, the addition of newfeatures such as health savings accounts and the benchmarking andmonitoring of plan performance—as well as the need to be preparedto cope with greater cyber risk—can provide sponsors with a way tokeep plans beneficial for employees into 2020 and beyond.

READ MORE:

• 7 questions your employees have about401(k)s
• A warning to all 401(k) plan sponsors who assumetoo much
• 401(k) education needs  more hands-onlearning- Carosa