- Willis Towers Watson (WTW) has replaced outdated defined benefits (DB) terms with new definitions that reflect more strategic ways of administering pensions. According to WTW, outdated definitions can cause excessive risk taking with no effect on a plan's revenues.
- The firm updated 10 DB terms to reflect strategic changes and their effect on pension investments. For example, the traditional definition of "fiduciary duty" was taking action that was reasonable and documented. Under the new definition, "fiduciary duty" refers to actions requiring a higher degree of scrutiny, now that multiple parties are involved, and being held to a higher standard requiring greater professional expertise.
- WTW recommends that employers add these updated definitions to their defined benefits terms.
Many companies have phased out their pension plans and replaced them with defined contribution plans, such as 401ks. With people living longer and collecting life-time benefits, HR is looking to modernize and improve the retirement benefits package as much as possible. Retirement plans also cost considerably less than healthcare plans, partly due to the shift to DBs instead of pensions.
Many of the strategic definitions WTW outlines require the expertise of financial professionals. But HR pros still often touch on retirement plans, especially since they have emerged as a key point of retention strategy as of late. As HR moves to a more strategic position in companies, leaders will need to keep these benefits — and terms — in mind.