DC Plan Sponsors Say Reviewing Fees Most Important Fiduciary Action
January 12, 2010 (PLANSPONSOR.com) - Callan Associates finds DC plan
sponsors saying that reviewing plan-related expenses was the most important
fiduciary action they took over the past year.
Virtually all of the plan sponsors in Callan's 2010
Defined Contribution Trends Survey: Getting the DC Plan Back on Track (93.3%)
have calculated the fees of their DC plan within the past 24 months, with the
majority (84%) having done so within the past year, according to a press
release. Plan sponsors also said that in 2009, they kept a sharp eye on
monitoring and evaluating fund performance and increased their communications
to calm participants’ fears about the market decline.
However, in 2010, strategic initiatives - which include
reviewing investment structure and plan design - will rise in importance. "In
2009, plan sponsors were consumed with managing poorly performing investments
and helping participants navigate the market collapse," said Lori Lucas,
defined contribution practice leader at Callan, in the press release. "Now
that most of the fires have been put out, sponsors are focusing on how to
reposition their plans for any market challenges ahead."
In 2009, real return/TIPS funds were the most common fund
additions and they will likely keep that position in 2010. The second most
common fund additions in 2009 were target-date funds and they are expected to
remain in that spot in 2010, according to the survey.
Most DC plans now have a qualified default investment
alternative, with 69.3% of plan sponsors reporting that a target-date fund is
their default. Lucas pointed out in the press release that in 2009, 55.9% of plan
sponsors offered the target-date mutual fund of their recordkeeper, and that
number is expected to be 56.5% in 2010.
At 93.2%, mutual funds dominate as an available
investment vehicle. However, more than half of plan sponsors (52.7%) also use
collective trusts - often a stable value fund - and over one-third (37.8%) use
separate accounts.
Other survey findings include:
- Nearly 19% of plan sponsors either reduced or eliminated
their company matching contribution in 2009, but in 2010, only about 8% plan to
take that action. Over the next 12 months, 58% of sponsors that either reduced
or eliminated the match plan to reinstate it.
- The adoption of auto features has plateaued, with just
under half (43.9%) of plans offering automatic enrollment in 2009—a figure that
has changed little since 2007. Similarly, the proportion of plans offering
automatic contribution escalation has stagnated to about one-third over the
past several years.
Callan surveyed 90 companies representing more than $300
billion in DC assets. The majority of respondents (nearly 74%) offer 401(k)
plans and one in ten have 403(b) plans - double the amount in Callan’s 2008
survey. The majority of plans have more than $100 million in assets and
one-third have assets of more the $1 billion. Fifty-four percent view their DC
plan as the primary company retirement plan.
For more information,
visit http://www.callan.com.
Rebecca Moore
editors@plansponsor.com