Plan sponsors in this year’s survey are looking for increased participation, increased deferrals, and greater diversification. Participation remained a top concern, and for increasingly obvious reasons. In the aggregate, this year’s respondents noted a continued downturn in participation-dropping another 3.6% on top of the 2.5% decline reported in last year’s survey. The impact was reflected most heavily in plans with $5 million to $500 million in assets. Smaller plans reported a dip of 2.8%, while larger plans, which recorded a huge 6% drop last year, barely budged in this year’s report, perhaps having already absorbed their decline.
However, that drop should not be attributed to the much-reported declines in employer matches. In fact, less than 12% of this year’s respondents said they had changed-or planned to change-their match in the near term. Even there, more than 60% of those contemplating change said those plans involved increasing, not cutting, the company match.
Asked to rate the level of participant services from their current 401(k) provider, employers were least satisfied with their provider’s participant education programs and participant communication materials, with call centers only slightly better rated, according to the survey of more than 3,200 401(k) plans, representing $500 billion in assets and 8 million participants.
The record 3,247 respondents to the seventh annual Defined Contribution Survey have remained relatively consistent in their expressed preferences for service, once again ranking service to plan participants at the top of their evaluation criteria in selecting a provider, and awarding it a 6.58 on our 7.0 scale. Similarly, there has been little shift in what plan sponsors considered second most important-the quality of service to the plan sponsors themselves, which rated a 6.47 on the same 7.0 scale. In fact, service was not only the most important criteria in evaluating a service provider, but also, once again, the predominant factor in deciding to dump an incumbent relationship.
While the importance of a focus on participants is hardly an earth-shattering insight to most, for the second year in a row, the very worst rated services were the heart and soul of participant service. Once again, the overall participant education program earned the lowest marks from plan sponsors, garnering a mere 5.48, though that was better than last year's 5.32 showing. Similarly, participant communication materials were next to last, with a rating of 5.83, while call centers garnered an overall ranking of 5.90. Clarity of participant statements managed to climb above the 6.0 mark, but just barely.
Not that these relatively low evaluations constitute a mass condemnation of the industry's efforts in this area. To some extent, they likely mirror the importance of the participant touchpoints to the overall program. Clearly, plan sponsors have high expectations-and rightly so-for their participant communications. Never was that more critical than in these times of extended soft markets and the apparently relentless media drumbeat about the problems with 401(k)s. Providers that are complacent in these areas act at their own peril.
Employers were pleased with both the accuracy and timeliness of participant reporting, as well as turnaround time on checks and participant Internet services, which have been made broadly available to participants in all market segments.
Participant Internet services received a score of 6.26 on the 7.0 scale and provider's Web presence received a mark of 6.16, a significant increase over the 5.93 given last year, showing providers' efforts in improving Internet services are being recognized by plan sponsors.