International Benefits: Defined contribution, hybrid plans prevail among world’s leading employers

New York — Most employers offering retirement plans to supplement government-sponsored pension systems now do so through defined contribution (DC) or hybrid approaches, according to a new global guide from Mercer.

Mercer’s Introduction to Benefit Plans Around the World: A Guide for Multinational Employers was created to help global companies more effectively assess, compare and provide retirement as well as medical and other group benefits to their employees.

“Multinational and local-country employers face many pressures – such as an aging population, market volatility, and increased governance and accounting requirements – that are hastening the move to defined contribution and hybrid plans,” said Giles Archibald, a Mercer international consultant based in New York.

“While DC and hybrid approaches have understandable appeal, their popularity may come at a cost,” Mr. Archibald continued. “We anticipate some reassessment of their use as companies make more of an effort to truly understand the impact of these retirement plan designs on employee savings and retirement patterns.”

Deborah Cooper, principal in Mercer’s London office in the UK, observed, “Increased reliance on defined contribution arrangements will lead to more government intervention. This will in turn increase costs. Hybrid arrangements can balance the risks employees face by relying on investment markets in pure DC schemes, with the regulatory and financial pressures experienced by employers providing DB schemes”.

Traditional defined benefit (DB) plans remain the predominant type of supplemental retirement plan in a number of countries, notably Japan, the Philippines, South Korea, Mexico, Venezuela, Finland, the Netherlands and Israel (see Table 1). Even among these countries, however, there is a strong trend toward covering newly hired employees through DC or hybrid arrangements.

Mercer’s Introduction to Benefit Plans Around the World provides extensive information on the design and prevalence of retirement, medical, sickness, disability and death benefit plans provided by multinational and leading local companies in 47 countries. This single-source, comprehensive guide also provides information on each country’s legislative, legal and regulatory climate.

Mercer’s guide summarizes key global trends, by country, as companies:

Move away from defined benefits
Raise the retirement age
Comply with new requirements for plan governance
Introduce new types of benefit plans
Grapple with rapidly rising medical costs

Additionally, it defines the mandatory retirement practices under local law and regulation, summarizes typical market practices, assesses the general pension environment, identifies opportunities and trends, and outlines recent and proposed legislation.

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 17,000 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, Chicago and London stock exchanges. For more information, visit