After a decade of increasing investment choices in defined contribution plans, employees want “simpler,” and employers appear to be listening.
A report from Aon Hewitt titled “2011 Trends & Experience in Defined Contribution Plans: Paving the Road to Retirement” finds that on average, plans offered 22 investment options in 2011, up from 20 in 2009; the median also rose from 18 to 22. However, after excluding target-date and target-risk funds, the average number of options dropped from 14 to 13.
“Many companies are offering investment options and advice tools that simplify investment decisions and help employees make better choices,” according to the report. “The prevalence of target-date portfolios and outside investment advisory services—including advice, guidance, and/or managed accounts—has increased significantly in the past two years. Regarding investment fund design, there is a focus on a tiered structure and distinct choices for employees. Target-date portfolios are now a staple in the bulk of plans, with eight in 10 plans offering them.”