According to a Segal Survey report, 82% of the DC plans in its study are companions to DB plans sponsored by the same unions and contributing employers for the same active workers. Most of the DC plans (62%) were profit sharing plans, with almost 30% offering a 401(k) salary reduction feature.
Forty-two percent of DC plans in the study allow participants to direct investments, while trustees direct investments for the rest of the plans, the report said.
The study found that annual account valuations are most common among multiemployer DC plans (55%), followed by daily account valuations (32%). Seven percent of responding plans reported quarterly account valuations, and 4% value accounts monthly.
Segal said that since the study was conducted, many boards of trustees of plans with annual account valuations have changed their plan provisions to value accounts more frequently to reflect investment performance more accurately.
Only 31% of multiemployer DC plans studied offer participant loans, and only 35% allow for hardship withdrawals. However, a large majority (83%) offer payment options at retirement in addition to lump sums, including monthly installments, a combination of a partial lump-sum and monthly installments, and a lifetime annuity either for the participant or the participant and spouse.
The study reflects information for 140 funds, all but two of which are Segal clients.
The study found 14 service providers represented by plans which allow participant-directed investments. According to the study report, no service provider dominates, but roughly half (55%) of the plans use one of three providers.
When hiring service providers for a DC plan, Segal recommends trustees look for the following:
- Service provider commitment to the multiemployer market;
- Dedicated member service center for multiemployer plans;
- Participant-friendly communications/education services;
- Open architecture for investment options; and
- Full disclosure of all fees.
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