According to Cogent Research’s “4th Annual Retirement Planscape Report,” 57% of plan sponsors selected compliance with regulations as a priority, followed by reducing plan costs, which was selected by 46% of sponsors. Enhancing participant education and increasing participant engagement were each selected as a priority by 43% of plan sponsors.
However, the adoption of automatic enrollment to get employees into the plan, as well as the adoption of other automatic plan features, seems to have stalled, noted Linda York, practice director for the Syndicated Research Group at Cogent Research, during a press call. “Adoption of automatic plan features has remained relatively unchanged in past three years, which is a little troubling since previous Cogent research shows two-thirds of participants are open to auto features,” York said.
According to the report, 24% of plan sponsors have adopted automatic enrollment only, and fewer plan sponsors have adopted automatic deferral escalation. Automatic rebalancing is the least-used auto plan feature among plan sponsors surveyed.The research also found that the bundled model for plan administration is preferred by most plan sponsors, particularly in the smaller segment, but among mega plans (greater than $500 million in assets), 52% prefer the unbundled model.
Large (between $100 million and $500 million in assets) and mega plan sponsors are more confident that their plan fees are comparable to their peers; 83% of mega plans are extremely confident. Following the first year of fee disclosures, 46% of plan sponsors are maintaining their current fee arrangements, 19% anticipate requesting fee reductions and only 8% plan to do a recordkeeper request for proposals (RFP).
Only 6% of plan sponsors overall indicated they are very likely to switch providers in the next 12 months, although around 30% of micro and small plan sponsors said they will consider switching. The research found the main reasons for switching are administrative fees (21%), service quality (20%), and quality and range of investment options (12%).
The Planscape Report rates 36 service providers. Cogent found brand awareness trended down. York speculates that this is due to a number of new smaller plan sponsors that have less access to advisers, so they have less awareness of provider options out there.
The provider favorable impressions score is flat; 41% of plan sponsors have a strong overall impression of firms they know. York said the findings show the uphill battle for challengers to the overall market leaders.When considering plan providers, the most significant detractor is strong brand recognition among participants, the report indicates. That is, if a plan provider is not perceived to be well-recognized with participants, it will be harder for that provider to get a consideration. The next biggest detractors are “exemplifies financial stability” and “leader in defined contribution (DC) industry.”
The number one enhancer to provider consideration is best-in-class plan sponsor service and support, followed by best-in-class participant service and support and transparency of fees.
York said there is an entire section of the report dedicated to plan sponsor experience with providers and their satisfaction with services used. Overall satisfaction is fairly high, but it varies by services and plan size. York noted that mid-size and large plan sponsors are most satisfied with service, while large and mega plan sponsors are most satisfied with disclosures.
To differentiate themselves, some providers are forming alliances to target a specific market. York pointed out the example of Bank of America Merrill Lynch partnering with Morningstar to provide an investment menu plus 3(38) fiduciary offering for small businesses. She also said some firms are really focusing on distribution; for example, American Funds expanded the investment choices available for its platform sold through advisers, boosting its success in the smaller plan market.
The annual Retirement Planscape Report allows plan providers to pinpoint competitive strengths and weaknesses in brand, loyalty, and key plan sponsor experience metrics to maximize acquisition opportunities and minimize attrition.More information about the report, including how to order a copy, is here.