Participants Trend Toward Few, Select Options

November 14, 2001 ( - While the average number of investment options provided was 14, participants are only using about a third of the available options - at best - according to plan sponsor respondents to PLAN SPONSOR's 2001 Defined Contribution Services Survey.

In fact, the largest plans said that participants were using an average of just 3.8 funds of the average 28 available in that size market.  

Broker Dealings

Despite those trends, nearly one in five (19%) plan sponsors now offer a self-directed brokerage option, according to the survey.   These offer participants the ability to transfer some or all of their account balance into a brokerage account, offering choices of mutual funds and/or investment choices beyond those offered within the plan proper.  

Plans with $5 million to $500 million in assets were more likely to provide this option than their larger or smaller brethren.   However, while 37.8% of the assets of the plans with less than $5 million in assets were so invested, larger plans saw just 3% to 15% of plan assets driven toward this option.

Nearly two-thirds of the respondents to this year’s survey have opted for investment options from multiple providers, up from 56.6% just two years ago.

Stock Shock?

Company stock continues to loom large in larger programs.   While just 16% of this year’s respondents offered the option, over 70% of plans with more than $1 billion in assets offered company stock, as did nearly two-thirds of those with $500 million to $1 billion.   Nearly half (43%) of plans with $200 million to $500 million in assets permitted the option, while more than a quarter of plans with $50 million to $200 million did so.

Among plans that offered it, nearly a quarter (24.6%) of participant balances were invested in company stock – a trend that was relatively consistent across all plan sizes.  

And, despite the market runoff that has impacted stock values, the investment in company stock is nearly unchanged from the 25% allocation reported in last year’s report.