Research

2012 Defined Contribution Survey: Looking to the Stars

Published in PLANSPONSOR November 2012

Navigate Research

Industry Stats

Number of participants in DC plan
20112012Change
<10042.7%37.6%-12.1%
100-49925.8%27.6%6.8%
500-9997.9%8.9%13.0%
1,000-4,99914.0%14.3%2.6%
5,000-10,0003.9%4.7%20.8%
>10,0005.7%6.9%20.9%
Total DC plan assets
20112012Change
<$5MM43.9%36.6%-16.6%
$5MM–$50MM31.3%36.2%15.7%
>$50MM–$200MM12.5%12.8%2.4%
>$200MM12.2%14.4%18.0%
Plan design elements
20112012Change
Auto-enrollment33.4%41.7%24.8%
Auto-deferral increases16.7%29.6%77.5%
Catch-up ContributionsNA97.1%NA
Written IPS61.0%74.1%21.4%
Safe harbor provision41.7%49.4%18.4%
Employer match73.6%76.4%3.8%
Use a financial adviser61.2%66.4%8.5%
Loan provision76.5%82.5%7.9%
Hardship provision84.6%90.7%7.3%
Participation rate among eligible employees
20112012Change
Average69.7%72.6%4.2%
Median75.0%80.0%6.7%
When employees are elligible to participate
20112012Change
Immediately upon hire33.1%35.9%8.4%
Within 3 months25.1%26.5%5.6%
After 4 to 6 months9.6%8.1%-16.0%
After more than 6 months32.2%29.6%-8.2%
Implementation of auto-enrollment
20112012Change
New/future employees90.9%87.0%-4.3%
Existing unenrolled employees29.6%29.1%-1.7%
Contributors below auto rate9.1%9.9%9.2%
Enrollees not invested in QDIA1.6%2.1%29.9%
Default investment for auto-enrollment
20112012Change
Retail target-date fund (active)30.4%31.1%2.4%
Retail target-date fund (indexed)15.0%15.8%5.0%
Custom target-date fund8.5%10.0%17.9%
Risk-based lifestyle fund7.1%8.0%12.7%
Balanced fund13.6%12.8%-6.1%
Managed account5.0%4.3%-13.1%
Stable value/GIC5.5%5.7%4.2%
Money market fund7.6%6.9%-9.2%
Other7.3%5.4%-25.8%
Number of investment options offered
20112012Change
Average20.617.6-14.8%
Median16.016.00.0%
Number of investment options held by participants
20112012Change
Average5.44.7-12.2%
Median4.04.00.0%
Types of investment options offered
20112012Change
Target-date funds67.8%72.3%6.6%
Risk-based lifestyle funds28.7%28.2%-1.9%
Employer stock7.7%8.4%8.5%
Self-directed brokerage17.9%18.8%4.9%
Real estate18.7%21.4%14.4%
Alternative investments2.7%2.7%-1.8%
ETFs1.0%0.9%14.3%
Approximate maximum match
20112012Change
>100% of 6% of salary4.2%5.9%40.5%
100% match of 6%6.2%16.8%170.6%
51%–99% of 6%27.3%21.0%-23.2%
50% of 6%30.7%30.6%-0.2%
<50% of 6%31.7%25.7%-18.9%
When participants are 100% vested
20112012Change
Immediately on enrollment30.8%31.8%3.3%
6 months0.9%1.0%14.7%
1 year5.8%5.3%-8.6%
2 years4.0%3.9%-1.7%
3 years12.3%13.6%10.4%
4 years3.1%3.4%9.8%
5 years24.0%23.4%-2.4%
More than 5 years19.1%17.6%-8.0%
Participants with outstanding loans
20112012Change
Average16.2%14.4%-11.1%
Median13.0%11.0%-15.4%
Participants making hardship withdrawals
20112012Change
Average3.6%2.0%-44.8%
Median2.0%1.0%-50.0%
Measures used to gauge plan success
20112012Change
Participation rate64.8%65.2%0.6%
Deferral rates of various employee segments33.4%28.3%-15.4%
Do not have any formal success measures.29.1%28.4%-2.4%
Employee satisfaction (surveys)25.3%17.7%-29.8%
Percent of participants saving to match25.0%19.9%-20.5%
External/competitive benchmarking of plan design22.7%19.8%-12.7%
Percent of participants with "appropriate" asset allocations14.1%11.3%-19.8%
Percent of participants with using advice tools/seminars offered13.6%8.9%-34.7%
Percent of participants who increased deferrals in past year12.1%8.7%-27.8%
Participant Service Ratings (1–7 scale; 7=extremely satisfied)
20112012Change
Participant call center6.436.23-3.2%
Web site functionality6.416.20-3.3%
Online tools/services6.406.18-3.4%
Participant statements6.516.36-2.3%
Education program6.145.89-4.1%
Communication materials6.246.01-3.7%
Enrollment assistance6.406.16-3.8%
Retiree services/payments6.426.28-2.2%
Onsite meetings6.175.93-3.9%
Range of investments6.536.40-1.9%
Loan/withdrawal processing6.566.41-2.3%
Beneficiary administration6.416.24-2.7%
Participant fee disclosure6.206.210.1%
Sponsor Service Ratings (1–7 scale; 7=extremely satisfied)
20112012Change
Sponsor website/tools6.336.09-3.8%
Plan reports/benchmarking6.275.96-5.0%
Form 5500 processing6.456.29-2.5%
Compliance support/testing6.466.29-2.7%
Legislative/regulatory updates6.376.15-3.4%
Account team knowledge6.566.44-1.8%
Service responsiveness6.576.42-2.3%
Staff consistency6.486.34-2.2%
Plan design flexibility6.416.30-1.7%
Fee "cost-to-value"6.286.06-3.5%
Investment options formally reviewed
20112012Change
Quarterly32.9%39.0%18.5%
Twice a year17.7%19.1%7.9%
Annually33.6%29.1%-13.3%
Every 1-2 years3.9%3.2%-18.6%
Every 2-3 years2.7%1.9%-28.7%
Every 3+ years2.3%1.9%-19.6%
Never5.0%4.0%-19.5%
Other1.9%1.8%-5.3%
Investment vehicles used in DC plan
20112012Change
Mutual funds91.0%91.7%0.7%
Separate account21.1%22.7%7.7%
Managed account35.8%31.2%-12.9%
Commingled pool7.9%7.3%-7.4%
Collective trust10.9%12.6%15.3%
Participants taking advantage of the maximum match
20112012Change
All or nearly all participants29.2%22.7%-22.2%
Vast majority (75% or more)20.6%29.0%40.8%
About half25.6%25.6%0.0%
Less than half24.7%22.7%-8.1%
Average65.9%67.0%1.7%
Median74.0%75.0%1.4%
Types of employer matches offered
20112012Change
Match on paticipant contribution66.4%72.0%8.4%
Non-elective contribution14.9%7.9%-46.9%
Profit-sharing contribution28.6%25.3%-11.5%
Other contribution12.4%11.2%-9.4%
No employer contributions11.0%8.7%-20.9%
Average client relationship with DC provider
20112012Change
<1 year4.4%4.1%-8.2%
1 year to <3 years14.4%12.7%-11.7%
3 years to <5 years17.3%16.4%-5.3%
5 years to <7 years14.9%15.1%1.6%
7+ years46.8%51.7%10.6%
Frequency of provider evaluation
20112012Change
Annually33.6%29.6%-11.9%
Every 1 to <2 years12.2%12.1%-0.9%
Every 2 to <3 years16.4%16.0%-2.9%
Every 3 to <5 years19.6%21.1%7.4%
Every 5+ years11.9%12.1%1.7%
Never6.3%9.1%45.3%
Industries with highes plan participation rates
20112012Change
Architecture81.2%85.3%5.1%
Mining78.6%85.2%8.4%
Banking (Investment Services)77.6%85.0%9.5%
Utilities83.3%84.5%1.5%
Banking (Commerical/Retail)78.7%82.9%5.4%
Financial Services81.0%82.5%1.9%
Insurance/Reinsurance82.4%82.3%-0.1%
Membership Orgs./Industry Associations82.0%82.2%0.3%
Accounting/CPA Firms81.1%81.6%0.6%
Law Firms77.4%81.4%5.2%
Credit Unions79.0%81.4%3.0%
Whether a DB plan is offered in addition to DC plan
20112012Change
Yes (open to all employees)14.0%12.3%-12.1%
Yes (soft freeze)4.7%3.9%-17.0%
Yes (hard freeze)6.6%3.8%-42.4%
No defined benefit plan74.8%80.1%7.1%
Approximate avg expense ratio of plan investments
20112012Change
Less than 0.25% (25 bps)11.8%7.7%-34.6%
0.25%–0.50% (25-50 bps)18.9%18.1%-4.7%
0.51%–0.75% (51-75 bps)16.9%19.4%15.1%
0.76%–1.00% (76-100 bps)19.1%17.8%-7.0%
1.00%–1.50% (101-150 bps)9.7%9.4%-3.3%
1.60%–2.00% (160-200 bps)1.1%1.1%1.6%
2.10%–2.50% (210-250 bps)0.2%0.2%19.4%
>2.50% (more than 250 bps)0.1%0.0%-70.1%
Don’t know22.2%26.3%18.5%
How often administrative costs/fees are reviewed
20112012Change
Annually70.4%71.8%2.0%
Every 1-2 years9.7%9.5%-2.3%
Every 2-3 years7.5%7.1%-5.0%
Every 3-5 years4.3%4.3%-1.1%
Every 5+ years2.2%2.0%-8.0%
Never6.0%5.3%-11.6%
Who pay for the plan's admin/recordkeeping costs
20112012Change
Participants only30.7%24.2%-21.1%
Shared: revenue sharing and plan sponsor covers other expenses directly26.2%21.6%-17.8%
Fees paid exclusively by the plan sponsor34.6%41.7%20.5%
Other3.3%3.1%-5.0%
Don't know5.1%9.4%82.8%
Whether plan sponsor would recommend provider
20112012Change
Extremely likely to recommend66.0%65.2%-1.2%
Moderately likely to recommend20.6%24.2%18.2%
Slightly likely to recommend3.1%4.0%28.7%
Neutral4.2%3.9%-7.2%
Slightly likely to recommend against0.8%1.5%80.6%
Moderately likely to recommend against0.7%0.7%-7.2%
Extremely likely to recommend against0.9%0.6%-35.3%
Investment committee for the DC plan
20112012Change
Employees only43.7%53.4%22.3%
Non-employees only1.7%1.5%-13.8%
Employees & non-employees26.6%21.7%-18.6%
Unsure of Composition2.8%0.8%-72.0%
No investment committee25.2%22.6%-10.3%
Type(s) of DC plan(s) offered
20112012Change
401(k)87.6%86.4%-1.4%
401(a)4.8%5.0%4.8%
403(b)10.5%12.0%14.3%
4578.3%9.2%11.4%
Roth 401(k)/Roth 403(b)38.2%48.0%25.8%
Money Purchase3.2%2.2%-30.1%
Profit Sharing19.5%17.2%-12.0%
Nonqual Deferred Comp11.8%12.1%2.5%
ESOP4.2%3.8%-10.5%
SIMPLE IRA0.6%0.4%-26.6%
Other1.4%2.5%80.2%

Methodology

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Between late June and mid-September, approximately 49,000 survey questionnaires were sent to DC plan sponsors from the PLANSPONSOR magazine database, as well as to client lists supplied by DC providers; 5,930 total usable responses were received by the close of the survey on September 23. In order to qualify for rating in the survey, providers needed a minimum of 35 total client responses; to be rated in a particular asset category, a provider needed to meet specified quotas (see top of page 52). 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 percentage score represents the cumulative score out of 100%. Letter grades were assigned based on a standardized scale: A+ = 96.0% to 100%; A = 93.0% to 95.9%; A- = 90.0% to 92.9%; B+ = 87.0% to 89.9%; B = 83.0% to 86.9%; B- = 80.0% to 82.9%; C+ = 77.0% to 79.9%; C = 73.0% to 76.9%.

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.

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