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3 of 4 retirement plans don't review compliance regularly: Towers Watson

Posted On: Dec. 30, 2011 12:00 AM CST

Only 26% of defined contribution and defined benefit plan executives conduct regular operational and regulatory compliance reviews, according to a Towers Watson & Co. survey on retirement plan governance issues.

Although plan executives “have significant concerns about their retirement plans, relatively few are taking all the steps available to fully manage these risks,” said the report on a survey of 245 plan executives. “Additionally, organizations are tackling some issues reactively rather than proactively.”

Sixty-two percent said they will conduct a review if they or one of their advisers “identifies events that suggest new risks,” the report said, while 49% will conduct a review if they receive notice of a pending audit from the Internal Revenue Service or Department of Labor.

Although sponsors “tend to spend a fair amount of time” on assessing investments, “they spend less time on compliance of plans and operations,” Robyn Credico, Towers Watson senior consultant and defined contribution practice leader for North America in Arlington, Va., said in an interview. Ms. Credico is one of the report's authors.

Forty percent expect to devote more time to retirement plan governance issues in the next two years, 58% will devote the same amount of time during the next two years as they do now, and 2% will spend less time.

“Given recent developments (in litigation and regulation) and potential risk, it's surprising that a majority of companies seem to be content with the amount of time they spend on governance issues,” the report said. “On the other hand, respondents who expect to spend more time on plan governance seem to recognize the evolving governance landscape.”

Among the biggest challenges cited by plan executives were retirement benefit costs, 77%; regulatory complexity, 73%; and nonretirement benefits, such as health care, 62%.

The online survey was conducted in April and May. The survey and report are posted on the company's website.

Robert Steyer is a reporter for Pensions & Investments, a sister publication of Business Insurance.