PLANSPONSOR - December 2022-February 2023 - 22

2022 PLANSPONSOR DC SURVEY
and
Plan sponsors also ask for more details about recordkeepers'
other
vendors'
cybersecurity
systems
and
processes,
following on guidance from the Department of Labor last
year that added taking cybersecurity measures to fiduciaries'
responsibilities.
Each year, the PLANSPONSOR Defined Contribution Best
in Class Awards program measures recordkeeper services based
on responses to our annual DC Survey. Our 2022 list of recordkeepers
(see pages 25 through 27) is broken down by sponsor asset
size and compares them as to 12 different categories of offerings.
Looking for Value
Basic fee benchmarking, for many plans, has become part of
the annual review process, documenting that they regularly
review their fees. More than 40% of plan sponsors surveyed by
PLANSPONSOR said they benchmark plan fees annually.
But when considering fees, sponsors increasingly look for
the plan that offers the most value. " Since the market has been in
the red, employers are focusing on the bottom line, " Austin says.
" They want to maximize the ROI [return on investment] they have
on their retirement spend. "
That means asking about value-added financial wellness
services and programs, as well as whether in-plan funds reflect
the lowest-available share class. " That's a difficult exercise, "
Verdeyen says. " There's a lot of analysis that needs to be done
for each plan, because it's all relative to the plan-specific menu. "
New Challenges
As plan sponsors increasingly offer personalized products such
as managed accounts and lifetime income solutions, best practices
have evolved to measure their performance. Performance
benchmarking of all types of accounts should take a longer-term
perspective to smooth out the impact of volatility. The process
should reveal improved performance over time, Verdeyen says.
" Managed accounts don't have a large peer group, and they're
tailored to each person, " she says. " So you can't look at the median
performance of the peer group. "
The best approach in that case, she says, is to look at the
different cohorts of the plan-people of similar age in five-year
bands-and then benchmark that group against a plan-objective
metric, such as income replacement or retirement readiness.
" We're going to get more specialized benchmarks going
forward, " Verdeyen says. " We will also see more ability to benchmark
collective investment trust funds through data bases. Right
now, it's easy to get mutual fund information because it's publicly
available, but CITs are not publicly available through prospectus. "
Besides benchmarking their recordkeepers, plan sponsors
should also benchmark advisers, third-party administrators and
any other vendors associated with the plan.
" There's a common misconception that you have to make
changes to the plan after benchmarking, " Power says. " You don't
need to make changes. It's just a good fiduciary practice to benchmark
and show that you have a prudent process. -Beth Braverman
22 PLANSPONSOR.COM December 2022 - February 2023
20%
<$5mm
24%
<$5mm
$5mm -
$50mm
>$50mm -
$200mm
Has an Investment Committee
59% 56%
36%
$5mm -
$50mm
>$50mm -
$200mm
>$200mm -
$1b
>$1b
63%
>$200mm-
$1b
>$1b
<$5mm
$5mm -
$50mm
It has long been put forward that differences in plan size correlate to
differences in plan design, with larger plans-i.e., those with $200 million
or more in plan assets-using their size and scale to obtain higher levels of
plan oversight and lower investment fees. Such plans are also frequently
the first to use more progressive design features. For example, larger
plans were among the first to adopt automatic enrollment and remain
more likely to use the feature today, though smaller plans are catching up.
Large plans are also more likely to follow some accepted fiduciary best
practices, such as having an investment committee.
Defined Contribution Plans, by Asset Range
37%
36%
Plan Sizes
13%
8%
>$50mm -
$200mm
Offers Automatic Enrollment
73% 70%
50%
76%
>$200mm -
$1b
6%
>$1b
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PLANSPONSOR - December 2022-February 2023

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