Research

2011 Defined Contribution Survey: Points of Hue

Published in PLANSPONSOR November 2011

For more than a decade, PLANSPONSOR's annual Defined Contribution Survey has been the most important industry benchmark, measuring and evaluating 401(k) and other DC providers according to feedback from their own clients. Dozens of categories are rated in service to the employer as well as participant service.

Reprints of the DC survey are available for $45. Click here for more information.

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Industry Stats

Type(s) of DC plan(s) offered
20102011Change
401(k)90.10%87.60%-2.80%
401(a)4.40%4.80%9.10%
403(b)8.30%10.50%26.50%
4576.30%8.30%31.70%
Roth 401(k)/Roth 403(b)20.20%38.20%89.10%
Money Purchase3.20%3.20%0.00%
Profit Sharing15.10%19.50%29.10%
Nonqual Deferred Comp7.60%11.80%55.30%
ESOPn/a4.20%n/a
SIMPLE IRA1.30%0.60%-53.80%
Other2.70%1.40%-48.10%
Number of participants in DC plan
20102011Change
<10034.50%42.70%23.80%
100-49930.30%25.80%-14.80%
500-9999.60%7.90%-17.90%
1,000-4,99915.20%14.00%-8.10%
5,000-10,0004.4%3.9%-11.1%
Total DC plan assets
20102011Change
<$5MM53.60%43.90%-18.10%
$5MM–$50MM30.90%31.30%1.30%
>$50MM–$200MM8.20%12.50%52.40%
>$200MM7.30%12.20%67.10%
Plan design elements
20102011Change
Auto-enrollment29.40%33.40%13.60%
Auto-deferral increases10.30%16.70%62.10%
Written IPS56.10%61.00%8.70%
Safe harbor provision47.20%41.70%-11.70%
Employer match76.60%73.60%-3.90%
Use a financial adviser62.40%61.20%-1.90%
Loan provision77.10%76.50%-0.80%
Hardship provision72.20%84.60%17.20%
Investment committee for the DC plan
20102011Change
Employees only47.90%43.70%-8.80%
Non-employees only2.10%1.70%-19.00%
Employees & non-employees13.80%26.60%92.80%
No investment committee36.20%25.20%-30.40%
Participation rate among eligible employees
20102011Change
Average71.50%69.70%-2.50%
Median75.00%75.00%0.00%
When employees are elligible to participate
20102011Change
Immediately upon hire28.30%33.10%17.00%
Within 3 months25.80%25.10%-2.70%
After 4 to 6 months9.40%9.60%2.10%
After more than 6 months36.50%32.20%-11.80%
Implementation of auto-enrollment
20102011Change
New/future employees89.10%90.90%2.00%
Existing unenrolled employees32.60%29.60%-9.20%
Contributors below auto rate7.80%9.10%16.70%
Enrollees not invested in QDIA2.00%1.60%-20.00%
Default investment for auto-enrollment
20102011Change
Retail target-date fund (active)45.60%30.40%-33.30%
Retail target-date fund (indexed)7.30%15.00%106.10%
Custom target-date fundn/a8.50%n/a
Risk-based lifestyle fund4.50%7.10%58.20%
Balanced fund15.50%13.60%-11.90%
Managed account5.60%5.00%-11.50%
Stable value/GIC6.90%5.50%-21.00%
Money market fund9.70%7.60%-22.00%
Other4.80%7.30%53.00%
Number of investment options offered
20102011Change
Average21.420.6-3.70%
Median18.016.0-11.10%
Number of investment options held by participants
20102011Change
Average6.35.4-14.30%
Median5.04.0-20.00%
Types of investment options offered
20102011Change
Target-date funds60.50%67.80%12.10%
Risk-based lifestyle funds28.40%28.70%1.10%
Employer stock6.50%7.70%18.50%
Self-directed brokerage14.20%17.90%26.10%
Real estate19.10%18.70%-2.10%
Alternative investments3.60%2.70%-25.00%
Number of participants in DC plan
20102011Change
>10,0005.90%5.70%-3.20%
Types of investment options offered
20102011Change
ETFs1.20%1.00%-16.70%
Approximate maximum match
20102011Change
>100% of 6% of salary5.90%4.20%-28.80%
100% match of 6%10.50%6.20%-41.00%
51%–99% of 6%24.40%27.30%11.90%
50% of 6%28.90%30.70%6.20%
<50% of 6%30.30%31.70%4.60%
When participants are 100% vested
20102011Change
Immediately on enrollment29.40%30.80%4.80%
6 months1.40%0.90%-35.70%
1 year6.50%5.80%-10.80%
2 years3.60%4.00%11.10%
3 years12.50%12.30%-1.60%
4 years3.70%3.10%-16.20%
5 years23.60%24.00%1.70%
More than 5 years19.20%19.10%-0.50%
Participants with outstanding loans
20102011Change
Average12.30%16.20%31.70%
Median10.00%13.00%30.00%
Participants making hardship withdrawals
20102011Change
Average2.10%3.60%71.40%
Median1.00%2.00%100.00%
Measures used to gauge plan success
Participation rate64.8%
Deferral rates of various employee segments33.4%
Do not have any formal plan success measures29.1%
Employee satisfaction (surveys)25.3%
Percent of participants saving to match25.0%
External/competitive benchmarking of plan design22.7%
Percent of participants with "appropriate" asset allocations14.1%
Percent of participants with using advice tools/seminars offered13.6%
Percent of participants who increased deferrals in past year12.1%
Participant Service Ratings (1–7 scale; 7=extremely satisfied)
20102011Change
Participant call center6.326.431.70%
Web site functionality6.336.411.30%
Online tools/services6.286.401.90%
Participant statements6.436.511.20%
Education program6.036.141.80%
Communication materials6.146.241.60%
Enrollment assistance6.316.401.40%
Retiree services/payments6.296.422.10%
Onsite meetings6.116.171.00%
Range of investments6.406.532.00%
Loan/withdrawal processing6.476.561.40%
Beneficiary administration6.296.411.90%
Participant fee disclosure6.066.202.30%
Sponsor Service Ratings (1–7 scale; 7=extremely satisfied)
20102011Change
Sponsor website/tools6.326.330.20%
Plan reports/benchmarking6.236.270.60%
Form 5500 processing6.376.451.30%
Compliance support/testing6.456.460.20%
Legislative/regulatory updates6.336.370.60%
Account team knowledge6.556.560.20%
Service responsiveness6.586.57-0.20%
Staff consistency6.526.48-0.60%
Plan design flexibility6.416.410.00%
Fee "cost-to-value"6.246.280.60%
Investment options formally reviewed
20102011Change
Quarterly27.5%32.9%19.6%
Twice a year16.0%17.7%10.6%
Annually38.0%33.6%-11.6%
Every 1-2 years6.6%3.9%-40.9%
Every 2-3 years3.0%2.7%-10.0%
Every 3+ years2.8%2.3%-17.9%
Never4.6%5.0%8.7%
Other1.4%1.9%35.7%
Investment vehicles used in DC plan
20102011Change
Mutual funds90.1%91.0%1.0%
Separate account13.3%21.1%58.6%
Managed account31.9%35.8%12.2%
Commingled pool6.6%7.9%19.7%
Collective trust10.7%10.9%1.9%
Participants taking advantage of the maximum match
20102011Change
All or nearly all participants24.9%29.2%17.3%
Vast majority (75% or more)33.4%20.6%-38.3%
About half22.2%25.6%15.3%
Less than half19.5%24.7%26.7%
Averagen/a65.9%
Mediann/a74.0%
Types of employer matches offered
Match on paticipant contribution66.4%
Non-elective contribution14.9%
Profit-sharing contribution28.6%
Other contribution12.4%
No employer contributions11.0%
Average client relationship with DC provider
20102011Change
<1 year3.7%4.4%19.7%
1 year to <3 years19.9%14.4%-27.6%
3 years to <5 years20.4%17.3%-15.3%
5 years to <7 years15.9%14.9%-6.5%
7+ years40.2%46.8%16.4%
Frequency of provider evaluation
20102011Change
Annually33.8%33.6%-0.6%
Every 1 to <2 years12.4%12.2%-1.5%
Every 2 to <3 years14.2%16.4%15.7%
Every 3 to <5 years17.7%19.6%11.0%
Every 5+ years11.8%11.9%0.5%
Never10.1%6.3%-37.9%
Industries with highes plan participation rates
Utilities83.3%
Insurance/Reinsurance82.4%
Membership Org/Industry Assn82.0%
Accounting/CPA Firms81.1%
Education (Higher Ed)81.0%
Credit Unions79.0%
Chemicals78.8%
Banking (Commerical/Retail)78.7%
Labor Unions78.3%
Hotels/Gaming78.3%
Research & Development78.0%
Whether a DB plan is offered in addition to DC plan
20102011Change
Yes (open to all employees)9.9%14.0%41.1%
Yes (soft freeze)5.4%4.7%-13.8%
Yes (hard freeze)7.6%6.6%-13.4%
No defined benefit plan77.0%74.8%-2.9%
Approximate avg expense ratio of plan investments
20102011Change
Less than 0.25% (25 bps)13.7%11.8%-13.7%
0.25%–0.50% (25-50 bps)16.8%18.9%12.8%
0.51%–0.75% (51-75 bps)13.1%16.9%28.9%
0.76%–1.00% (76-100 bps)17.5%19.1%9.2%
1.00%–1.50% (101-150 bps)10.8%9.7%-10.4%
1.60%–2.00% (160-200 bps)1.1%1.1%-4.3%
2.10%–2.50% (210-250 bps)0.2%0.2%-10.4%
>2.50% (more than 250 bps)0.2%0.1%-55.2%
Don’t know26.6%22.2%-16.4%
How often administrative costs/fees are reviewed
20102011Change
Annually66.8%70.4%5.4%
Every 1-2 years13.2%9.7%-26.5%
Every 2-3 years7.0%7.5%7.1%
Every 3-5 years5.9%4.3%-27.1%
Every 5+ years2.4%2.2%-8.3%
Never4.6%6.0%30.4%
Who pay for the plan's admin/recordkeeping costs
Participants: revenue sharing from investments20.3%
Participants: mix of revenue sharing/fixed costs10.4%
Shared: revenue sharing and plan sponsor covers other expenses directly26.2%
Fees paid exclusively by the plan sponsor34.6%
Other3.3%
Don't know5.1%
Whether plan sponsor would recommend provider
20102011Change
Extremely likely to recommend69.1%68.0%-1.6%
Moderately likely to recommend21.4%21.8%1.9%
Slightly likely to recommend3.3%3.6%9.1%
Neutral3.8%4.3%13.2%
Slightly likely to recommend against0.8%0.9%12.5%
Moderately likely to recommend against0.8%0.7%-12.5%
Extremely likely to recommend against0.8%0.7%-12.5%

Methodology

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METHODOLOGY: Between late June and late August 2011, approximately 50,000 survey questionnaires were sent to DC plan sponsors from the PLANSPONSOR magazine database, as well as to client lists supplied by DC providers; 6,885 total usable responses were received by the close of the survey on August 26, 2011. In order to qualify for rating in the survey, providers needed a minimum of 35 total client responses. In order to be rated in a particular asset category, a provider needed at least 15 client responses per service category in the micro, small, or mid asset categories, and at least 10 responses in the large or mega asset categories. Scores for participant and sponsor services were calculated in each asset category in which a provider qualified for a rating. The score for participant services in each provider’s listing comprises the cumulative average of 13 categories, and sponsor service comprises 10 categories. The number of Best in Class awards won in each asset category is listed (see Best in Class charts for individual category awards). The percentage score represents the cumulative score out of 100%. The letter grades were assigned according to the cumulative scores as follows:

2011 DC Survey 

 

 

Archive

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DEFINED CONTRIBUTION SURVEY - Provider Ratings

For nearly two decades, PLANSPONSOR's annual Defined Contribution Survey has been the most important industry benchmark, measuring and evaluating 401(k) and other DC providers according to feedback from their own clients. Major defined contribution providers are rated in the various client categories they serve, and benchmark information is collected for plan sponsors to gauge their plans against their peers.