Options Expand for Participants in 2002

November 21, 2002 (PLANSPONSOR.com) - Plan sponsors continue to offer participants more investment choices - but they don't seem be taking full advantage.

According to PLAN SPONSOR’s 2002 Defined Contribution Survey, the average number of funds offered was 15.94 for our survey respondents, a figure that held up consistently across all market segments, save one.   Not surprisingly, that exception was in the largest market segment, plans with more than $500 million in assets, where 31 fund choices was the average, compared with “just” 24 a year ago.   A year ago, the average number of fund offerings was 14.

Participant Picks

Participant utilization of the fund choices available also rose by a modest increment, with survey respondents reporting that participants are investing in about 4.65 fund options, on average, compared with about 3.8 in last year’s survey.   Participants in plans with $50 million to $200 million in assets used 5.5, on average, while participants in the smallest plans took advantage of 5.2.  

Ironically, participants in the largest programs, which had the greatest number of options available, only chose to invest in 4.1, on average.

Those fund options were increasingly drawn from a variety of providers, with more than two-thirds (69.7%) of survey respondents reporting the use of investment funds managed by multiple managers.   A year ago, less than two-thirds did so, while two years ago only about 55% did.   However, more than three-fourths of the plans in every segment other than the smallest used multiple providers.  

Auto Pilots

Automatic enrollment continued to grow in popularity, and was offered by roughly 18% of plan sponsors in every market segment.   Not surprisingly, it was somewhat more likely to be in place in larger plans – nearly 1 in 5 plans with more than $500 million in assets did so, as did more than 26% of those with $200 million to $500 million in assets.

Self-directed brokerage accounts (SDBAs) also continued to expand, though the slumping markets have no doubt had a dampening impact on the adoption rate.   Roughly 23% of this year’s respondents offered the option, compared with 19% a year ago.   Roughly 1 in 5 survey respondents indicated that access to an SDBA was available via the Internet.

Coming Tomorrow:   Connecting With Advice