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Accenture Pensions Survey Explores the Impact of Defined Contribution Plans on Pension Systems—and More
Public retirement organizations and pension systems are riding a wave of reform. Longer life expectancies, changes in pension funding status as well as economic and legislative pressures have fueled growing interest in defined contribution and hybrid pension plans in recent years.
These plans are a stark contrast to traditional defined benefits plans—creating vastly different roles and responsibilities for the public retirement community and retirees, and even remaking the relationship between them. What does this transition mean for public pension organizations and the pension systems they operate—and for members’ retirement security?
A new Accenture Pensions survey of pension decision makers and influencers, and our team’s insights on what’s happening in the field, offer an interesting perspective about rise of defined contribution plans—and their impact on the public pension mission as public pension organizations take on a new “coaching” role. Learn more about the survey and our analysis of how organizations can begin planning today for defined contribution pension plans.
To take the pulse of the defined contribution transition, Accenture surveyed decision makers, influencers and professionals in nearly 100 pension organizations serving state, local, county and municipal government employees as part of the Accenture Human Services Pension Program Survey: Defined Benefit vs. Defined Contribution.
Survey findings reveal that the current plan offerings among respondent organizations vary. More than half offer multiple plan types; nine out of 10 currently offer a defined benefit plan, half offer a defined contribution plan and one-quarter offer a hybrid pension plan.
Respondents report that most members are currently enrolled in a defined benefit plan—with an average 84 percent enrollment. When asked to estimate the percentage of plan members participating in each plan type a decade out, 45 percent of respondents predict that defined contribution membership will increase somewhat—while 16 percent see it increasing significantly.
Successfully navigating this transition—and sustaining viability over time—means that pension organizations must make significant changes. It is imperative that they deliver on their missions differently and move from the current transactional focus to a new “coaching” role. This means helping members prepare and manage retirement in a whole new way.
This unprecedented shift is—and will continue to—change public pension organizations, service delivery models, enabling technology, and how overall system effectiveness is measured. Moreover, member expectations will continue evolving, impacting relationships with employers, members, retirees and stakeholders.
Accenture Pensions’ perspective is that planning for a defined contribution future can begin today for organizations at every stage of the journey. While actual implementation may be a horizon issue for many, it is a watershed moment that cannot go unaddressed indefinitely. Forward-thinking public retirement organizations can smooth the transition by focusing on several critical areas, all of which are rooted in this new coaching role.
Public pension organizations should focus on the following to prepare for the defined contribution transition:
1. Taking Care of Members—and Their Retirement SecurityThe defined contribution transition will reinvent customer service in pensions, deepening member relationships. As members transition to defined contribution plans where they must make investment decisions, pension entities will enter a whole new coaching paradigm where fostering members’ financial literacy is paramount and essential to protecting their retirement security.
2. Managing Change—and Reshaping the OrganizationChange management will be a significant and continuous focus for pension organizations throughout the defined contribution transition. The foundation of this will be staff reallocation and education initiatives. The current emphasis on back-office, transactional tasks will be replaced by new far-reaching customer service and member education needs. The focus will be on understanding the right resource mix and staffing appropriately, so that existing staff is optimally allocated and skill gaps are filled.
3. Driving Innovation—and Working in New WaysThe changing relationship between pension organizations and members will drive the need for innovation. Not only will members want more real-time communication, they will look to digital channels, including mobile, to review and make changes to their account. Meeting members where they are will take on a whole new meaning and urgency.
4. Integrating Technology—and Making the Right IT InvestmentsDirect contribution plans require a higher level of integration to external systems compared to direct benefit plans. As such, pension organizations will need to make changes that may go beyond the experience of their IT staff as they address the integration architecture and security issues associated with the real-time exchange of data.
June 18, 2012
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