The Stanford Center on Longevity recently released a paper titled The Next Evolution in Defined Contribution Retirement Plan Design: A Guide for DC Plan Sponsors to Implementing Retirement Income Programs.  Steve Vernon, Consulting Research Scholar at the Center, collaborated with Dr. Wade Pfau at The American College and the Society of Actuaries to prepare the research and write the paper.

This guide is intended to inform employers, plan sponsors and their advisors on the key issues with implementing retirement income programs in defined contribution (DC) plans, and help plan sponsors carry out their due diligence when considering such a program. It describes various retirement income generators, demonstrates that the different retirement income generators produce significantly different amounts of retirement income at and during retirement, and contains checklists for plan sponsors to follow when implementing a retirement income program.

The report contains stochastic projections of retirement income prepared by Dr. Pfau under various economic scenarios, and shows that various retirement income generators react differently whether economic scenarios are expected, unfavorable or favorable. The report also illustrates that plan sponsors can significantly increase retirement incomes for their employees by offering retirement income solutions with institutional pricing compared to retail pricing.The Center’s goal is to help employees, plan sponsors, and society with these critical retirement planning issues, given that DC plans are the dominant form of retirement plans today.  This paper is part of the Center’s ongoing effort to influence and help plan sponsors to operate DC plans as true retirement plans, not just capital accumulation plans.  The Center is planning future projects that will further this goal.