Higher Ed. Plan Sponsors Looking to Simplify

December 6, 2012 (PLANSPONSOR.com) – Survey findings reveal that simplifying investment options is a top challenge for plan sponsors in the higher education industry.

Plan sponsors continue to seek ways to facilitate administration and simplify decisionmaking for participants, according to the survey by Cammack LaRhette Consulting. Consolidating or reducing the number of vendor products (vendors and investment options) being offered to employees was ranked as the top challenge for plan sponsors, and more than half noted that changing the number of investments in their plan was a key initiative for the upcoming year. Sixty-three percent of plans offer 50 or fewer fund options, and 84% utilize only one or two vendors.

In addition, 22% of plan sponsors now have, or plan to implement, an automatic enrollment feature.  

Despite the focus on simplifying options for employees, plan sponsors are not convinced that the new fee disclosure regulations will help participants make investment decisions; 25% of responders believe the regulations will actually make it more confusing for participants, whereas only 9% believe it will make it easier. Excessive administrative costs have led to an increasing focus on plan expenses, as indicated by the 19% who responded that changing how plan expenses are paid is a key initiative, up from 9% in 2011 and 2% in 2010. The use of expense reimbursement accounts, a mechanism that allows the plan sponsor to typically decrease fees by capturing revenue in excess of their recordkeeping costs, has jumped from 11% in 2011 to 43% in 2012.  

The survey also found heightened fiduciary concerns have made the use of consultants and advisers the norm, rather than the exception; 64% of plan sponsors utilize a consultant or investment adviser, up from just 33% in 2010.  

Employer contributions to higher education retirement plans remain robust and largely unchanged from 2011. The majority of universities in the study indicated an immediately vested employer contribution of 8% of pay or greater, through a combination of base and matching contributions.  

More than 100 of the country’s leading private colleges and universities responded to Cammack LaRhette’s Higher Education Retirement Plan Survey.