WTW's DC survey finds employers excel at accumulation but fall short on decumulation support, leaving employees to navigate retirement income alone
A recent survey of more than 550 US employers by WTW has exposed an uncomfortable truth at the centre of defined contribution plan governance: a large majority of plan sponsors have no formal definition of what retirement readiness means for their workforce.
“You can't prove that your plan works if you haven't defined what working actually means,” said Chris West, senior managing director and DC strategy leader at WTW. “Employers are facing a retirement readiness gap and that pressure is mounting for them to prove that their plan works,” West added, underscoring the main theme from the survey.
The issue resonates north of the border for Canadian plan sponsors too. According to C.D. Howe research earlier this year, 9.1 million Canadian employees do not have any workplace retirement plan. The authors of that report argue coverage is at the heart of retirement readiness.
WTW’s survey identified that many employers are relying on blunt, aggregated data rather than segmented analysis, administrative burden is crowding out strategic thinking and the transition from accumulation to decumulation remains a weak point across the DC landscape.
Measuring retirement readiness varies
Among the employers that do attempt to measure readiness, approaches vary. While some lean on participation rates, others point to accumulated balances or use age as a proxy - a holdover, West notes, from defined benefit plan conventions. Still others fall back on gut instinct.
“Employer support is really less developed at this important stage of an individual in their retirement journey. Planning tools and flexible withdrawals are widely available while more comprehensive retirement income solutions remain less common,” she said.
“As a plan fiduciary, you have a lot of fiduciary responsibilities. You've got day-to-day responsibilities, you've got audit responsibilities, you've got required reporting responsibilities. And what we heard [from the survey] is that those activities are holding plan sponsors back from being able to be strategic within their plan,” said West, adding that routine compliance work leaves little room for plan sponsors to define what retirement readiness actually looks like for their workforce.
“Especially when it comes to moving the accumulating balance in [members’] retirement plan to actually converting that to some sort of retirement income perspective,” she added.
Decumulation, the next step in retirement readiness
The real test of a DC plan's effectiveness, West believes, comes at the point where saving stops and spending begins. She argues that the industry has built strong accumulation machinery - auto-enrolment, investment education, savings defaults - but hasn’t really matched that progress on the decumulation side. Retirement income solutions exist, but uptake has been weak because the products are complex and hard to communicate.
The challenge for employers is helping employees account for the full picture, from healthcare costs, daily living expenses, other assets, government benefits, rather than chasing a single headline number.
"If they don't feel like they've got the education, they don't do anything because people aren’t comfortable making those decisions, and that might not be the answer," she said, adding the risk is that inaction becomes the default. Not because employees don't care, but because no one has equipped them to act, she added.
Still, West acknowledges employers have different reasons for holding back. Complexity is the most common as there’s typically no single platform or product that addresses the full range of decumulation needs, and the effort required to evaluate, implement, and communicate multiple solutions creates confusion.
Beyond logistics, she suggests there's a deeper philosophical split. Some employers see it as their responsibility to equip employees with the resources to make sound retirement income decisions while others consider their obligation fulfilled once they have helped workers accumulate savings, and view decumulation as the individual's problem to solve.
Deeper plan data exposes retirement readiness blind spots
West underscored that participation rates and loan counts are surface-level metrics. She argues that sponsors need to go deeper, like examining age bands, tenure, contribution history, withdrawal patterns, and geographic differences to understand what different cohorts within the workforce are actually doing.
That includes cross-referencing DC plan behaviour with other benefit plans, such as HSAs, to get a fuller picture of employee financial activity.
A common blind spot, she noted, is the gap between what employers offer and what employees use. Once sponsors dig into the data, they often discover they are paying for features no one touches - dollars that could be redirected toward solutions that match how employees actually behave.
The starting point, West suggests, should always be the outcome, not the product.
“What decisions will employees need to make? Where are they most likely to need guidance?” she said. "And then you say, ‘OK, how can the plan help our employees translate their accumulated savings into a sustainable retirement strategy and income?’”
