hardship distribution, compared with 1% a year ago.
The number of plan options slipped slightly in this year’s survey,
with a median response of 16 options compared with 18 a year
ago (the average was 20. 6, down from 21. 4). Additionally, the
number of options was notably consistent across all market
segments. Also, the number of options in which participants
invested their savings was slightly lower: 4.0 at the median,
compared with 5.0 a year ago (the average slipped to 5. 4 from
6. 3 in the 2010 DC Survey). Participants in micro and small
plans tended to invest in 5.0 funds, whereas those in larger
plans only chose 4.0, according to the survey respondents.
size plan sponsors were in that category (along with nearly
5% of the largest plans). Roughly two-thirds of larger plans
had a committee composed only of internal staff/employees,
with the rest relying on a committee of both internal staff and
non-employees. Most of those committees do so with a written
investment policy statement, or IPS. Roughly 88% of the plans
in the mid-size, large, and mega markets do, as do 72.4%
of small employers. However, just 36.9% of micro plans do,
while one in five in that segment say they do not know if they
have an IPS for their DC plan.
Nearly half ( 48.1%) of mega plans offer employer stock as an
investment option, as do more than a quarter
( 27.1%) of larger plans. Nearly 80% of mid-size, large, and mega plans offer a stable
value option. About 7% of plans in all market
segments offer an “in-plan” guaranteed investment option, though only about 1% provide an
out-of-plan version.
Exchange-traded funds (ETFs) barely showed
up, however. A mere 1% of this year’s respondents said they provided an ETF option in
their plan, largely in line with the trends in
last year’s survey.
There has been some turnover in the target-date fund space; nearly a third of this year’s
respondents indicated that they had in place a
different TDF family than they did in 2008, a reading that was
found consistently across market segments. On the other hand,
nearly one in 10 were not sure about that result.
Measures of Success
There are, of course, many measures of DC plan success, and
sponsors frequently rely on more than one. This year, we asked
plan sponsors to share their criteria. Far
and away, the most commonly cited was
participation rate, the choice of two-thirds
( 64.8%) of this year’s respondents, more
than eight in 10 of those in the mid- and
large-plan categories, and nearly 90% of
those in the largest plans. It was the most
commonly cited criterion among micro-size plans as well, although only by 50%.
The deferral rate of various employee
segments was the next most common,
cited by a third overall and about half
of larger plans, while the percentage of
participants saving to the match was
noted by a quarter overall, but was even
more common among larger programs.
PLAN
SPONSORS’
SENSE OF
FEES PAID BY
THEIR PLANS
WAS ALL
OVER THE
BOARD.
Review Views
When it came to reviewing those options, survey respondents
split nearly equally between a quarterly and annual review cycle
( 32.9% versus 33.6%), though larger plans—those in the mid,
large, and mega end—were significantly more likely to do so
on a quarterly basis (about two-thirds each), and smaller plans
were much more likely to do so annually. A little more than
45% of micro-plan respondents indicated an annual review
cycle, for example, while those in the small-plan segment were
slightly more inclined ( 36.4%) to do so quarterly versus annually
( 31.4%) or twice a year ( 25.2%). One in 10 micro-plan respondents said they never formally review those investment options.
Employee satisfaction surveys were noted by roughly a quarter
overall, while external/competitive benchmarking of plan
design was cited by about one in five overall, about half of
larger plans, but only one in 10 of micro plans. Most striking,
however, was the fact that a full 29% of the respondents to this
year’s survey said they did not have any formal plan-success
measures.
Of course, a plan’s success is not completely dependent on the
provider, but it surely has an impact. While most of the respondents to this year’s DC survey had managed to rack up some
respectable tenure with their DC provider, significant minorities in each market segment indicated that they formally review
that provider on an annual basis. In fact, nearly half ( 43.5%)
of the plan sponsors in the micro segment said they did so on
that frequency, as did nearly a quarter ( 23.1%) of those in the
mega-market segment.
As for the committees that consider those options, though a
full quarter said they had no such committee, that was largely
the numerical result of the reality that half ( 49.2%) of micro-
Regular due diligence is no guarantee of a good result, of course—
but it surely beats the alternative. —Nevin E. Adams, JD
