Benefits May 20, 2008

Canadian Plan Sponsors Say Participants Confused about Investment Choices

May 20, 2008 (PLANSPONSOR.com) - Canadian employers who sponsor defined contribution (DC) plans - or capital accumulation plans (CAP) - are worried that their employees do not understand their investment choices under the plan, according to a survey by Buck Consultants.
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According to a press release, the study, “Moving Forward – An Overview of Capital Accumulation Plans in Canada,” found that 74% of CAP sponsors think members are confused about investment options. This was the top concern for sponsors in spite of the fact that 81% of respondents indicated they have a formal communications strategy.

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The survey found that 57% of sponsors offer more than 10 investment choices – up from only 40% that offered more than 10 options in 2003. “The more options you give employees, the less likely they are to actually make informed choices, and that can fuel investment ‘by default’,” suggested Peter Arnold, Buck’s National Practice Leader for Investment and DC Consulting in Canada, in the press release.

Arnold added that many well-run CAPs are helping employees by offering fewer investment options and more delegation of responsibilities to service providers, and making it a priority to better understand employee investment patterns.

Other top concerns of CAP sponsors, according to the release, include:

  • Governance and compliance issues (68%),
  • Benefit adequacy (68%),
  • Employee satisfaction (66%), and
  • Cost containment (64%).

The Buck Consultants survey of more than 150 employers was conducted in the third quarter of 2007. The study report can be ordered online at www.bucksurveys.com for $400.

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