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The survey found some gaps between identification and implementation of these best practices. While all consultants surveyed say they recommend a limit of 15 investment options to help participants make better choices, nearly half (46%) of plan sponsors maintain 16 to 25 options and 8% offer more than 25 options. Three-quarters of plan sponsors do not offer access to alternative asset classes. Mutual funds are the most popular investment vehicle, used by 79% of DC plan sponsors surveyed. However, the shift to collective investment trusts (CITs) is under way, with 73% of participating DC plan sponsors offering CITs and many remaining plans considering them for future use. As participants enter retirement, DC plans could improve outcomes by maintaining a relationship with retirees, so they continue to get the benefits of institutional pricing and professional oversight of investment options in the plan. Yet the survey found a significant portion of retirees take lump-sum payouts from their DC plans, and only 31% of plan sponsors encourage participants to keep their assets in the plan. Nearly two-thirds (65%) of plan sponsors offer income planning tools to retirees, and more than half (58%) offer income education and advice. Regarding issues from limiting investment options to keeping retirees in the DC plans, survey respondents identified potential roadblocks to adoption of strategies from defined benefit plans and other institutional investors. Plan sponsors cited resistance from participants, who tend to view any change as a loss of benefits. Concern about fiduciary liability can also be an impediment, although plan sponsors and consultants have differing views on its impact. While 66% of consultants said their plan sponsor clients voice concerns about fiduciary liabilities related to investment changes in their DC plan, only 25% of plan sponsor respondents said it is a significant concern. The research report can be found at http://www.northerntrust.com/pointofview/path-forward/index.html.
The survey found some gaps between identification and implementation of these best practices. While all consultants surveyed say they recommend a limit of 15 investment options to help participants make better choices, nearly half (46%) of plan sponsors maintain 16 to 25 options and 8% offer more than 25 options.
Three-quarters of plan sponsors do not offer access to alternative asset classes. Mutual funds are the most popular investment vehicle, used by 79% of DC plan sponsors surveyed. However, the shift to collective investment trusts (CITs) is under way, with 73% of participating DC plan sponsors offering CITs and many remaining plans considering them for future use.
As participants enter retirement, DC plans could improve outcomes by maintaining a relationship with retirees, so they continue to get the benefits of institutional pricing and professional oversight of investment options in the plan. Yet the survey found a significant portion of retirees take lump-sum payouts from their DC plans, and only 31% of plan sponsors encourage participants to keep their assets in the plan. Nearly two-thirds (65%) of plan sponsors offer income planning tools to retirees, and more than half (58%) offer income education and advice.
Regarding issues from limiting investment options to keeping retirees in the DC plans, survey respondents identified potential roadblocks to adoption of strategies from defined benefit plans and other institutional investors. Plan sponsors cited resistance from participants, who tend to view any change as a loss of benefits. Concern about fiduciary liability can also be an impediment, although plan sponsors and consultants have differing views on its impact. While 66% of consultants said their plan sponsor clients voice concerns about fiduciary liabilities related to investment changes in their DC plan, only 25% of plan sponsor respondents said it is a significant concern.
Rebecca Mooreeditors@plansponsor.com