The power of moving first: Avoiding groupthink in defined contribution plans 

Historically, defined contribution pension plans (DC plans) have been hesitant to be early adopters of investment or plan design innovations. However, there are significant benefits to being a first mover in this space. In a recent poll conducted during Mercer's Global Investment Forum in Nashville, we found that a majority of DC plan sponsors were not likely to be early adopters: 62% said they were “not likely at all” while 30% were “somewhat likely” and only 8% were “very likely”.

Despite the benefit, several factors often deter plan sponsors from taking the leap and becoming early adopters. These include:

Document the decision-making and due diligence process and involve external experts and legal guidance where needed. Being a first mover doesn’t always require plan sponsors to make the “right” decision, as long as the correct process has been followed.

Recognise that each defined contribution pension plan is unique. Decisions should be based on the demographics and unique needs of plan participants, alongside overarching philosophies from your Retirement Plan Committee. Benchmarking against the wider market is useful but should not be the sole basis for decision-making — and nor should litigation.

Consider delegating the fiduciary role to trusted experts who can make decisions on behalf of the plan sponsor. This can help navigate complex regulatory requirements and further mitigate risks.  

Being a first mover in DC plans requires empowerment, due diligence, and a mindful approach to risks. By embracing innovation and avoiding groupthink, plan sponsors can meet the unique needs of plan participants while staying ahead of the curve. It is essential to document the decision-making process, involve external experts, and put the demographics and preferences of plan participants first. Despite the potential barriers, being an early adopter can improve plan outcomes and give an employer a competitive edge.