United States
New York, 18 August 2011



Nearly half of defined contribution (DC) retirement plan sponsors either offer or plan to soon offer some type of inflation protection strategy to their participants.  Among the sponsors currently offering such strategies, a stand alone Treasury Inflation Protection Securities (TIPS) is the most widely used option (24%) versus combining multiple asset classes (12%).  Another 10% of sponsors intend to offer some type of strategy within the next year (see Figure 1).  These findings come from the recent Mercer US Defined Contribution Investment Survey of more than 200 DC plan sponsors.

“Given that TIPS and other inflation protection strategies were not very prevalent just a few years ago within DC plans, we were pleased to see the degree to which US plan sponsors are adding these options, particularly the diversified options,” said Toni Brown, Director of U.S. Client Consulting for Mercer’s Investment Consulting business.  “We attribute this popularity to heightened concern over inflation and the fact that more diversified products are coming into the marketplace. These new products allow sponsors to look beyond stand alone TIPS and potentially offer a diversified combination of asset classes that includes TIPS, Commodities, Natural Resources and REITs as another type of inflation protection strategy for their participants.”

When analyzing inflation protection strategies by plan size, those plans with $1billion or more in assets were most likely to offer or plan to offer some type of inflation protection (66%) while those with $250 million or less were least likely (37%).  “We suspect the difference can be attributed to larger plans generally having more involvement from the Finance or Treasury groups,” said Ms. Brown.

Other key findings from the survey include:

• Fifty-eight percent of respondents have no intention of transitioning from mutual funds to other investment vehicles such as collective trusts and/or separate accounts.  For those sponsors who will be transitioning, 34% percent cited lower investment fees as the key rationale for the move.
• Of those respondents that offer fixed payout options, the majority of sponsors (80%) offer participants the option to purchase an annuity at retirement outside the plan. The payout of income is typically provided via a stand alone investment option (59%).
• While 50% of plans offer investment advice and/or managed accounts, usage among participants is very low. For investment advice, 68% of sponsors indicated that usage is 10% or less and 71% of sponsors indicated that managed account usage is also 10% or less.

Figure 1 – Inflation Protection Strategies in Defined Contribution Plans

To learn more about the Mercer Defined Contribution Investment Survey and download a summary of key findings, please visit http://www.mercer.com/2011-us-dc-investment-survey.

About the Mercer Defined Contribution Investment Survey
Mercer issued a short survey in May of 2011 to assess the plan sponsor community's views on investment trends.  Mercer received responses from 233 plan sponsors, with the largest share (48%) from publicly traded companies followed by private companies (21%) and not-for-profit organizations (18%).  The vast majority of sponsors (81%) represented 401(k) plans followed by 13% for 403(b) plans.  Forty-four percent of sponsors indicated their largest DC plan was less than $250 million while 26% of plans had assets greater than $1 billion.  

About Mercer
Mercer is a global leader in human resource consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues by designing, implementing and administering health, retirement and other benefit programs. Mercer’s investment services include investment consulting, implemented consulting and multi-manager investment management. Mercer’s 20,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York and Chicago stock exchanges. For more information, visit www.mercer.com.