According to PLAN SPONSOR’s 2002 Defined Contribution Services Survey, “market image/reputation” soared up the 7.0 ranking scale – jumping from 5.53 to 5.73 in importance for the record 2,500+ plan sponsor respondents to this year’s survey. Not enough to crack the top five mind you, but still the most significant jump in importance among plan sponsors. The only item to remotely approach that kind of increase in this year’s survey was “provider’s web presence,” which gained only half as much ground.
At the same time there was an “emerging convergence” in the weighing of key service elements in evaluating and selecting a provider. For example, for the past three years, quality of service to participants and quality of service to plan sponsors have ruled the roost in terms of importance, a track record untrammeled in this year’s evaluation. However, service to participants dropped from a dominating 6.66 on a 7.0 scale last year to 6.58 in this year’s ranking, while service to plan sponsors also slipped in.
Meanwhile, financial strength and investment performance, last year’s #4 and #3, maintained that status, but flipped order in this year’s survey. Despite, or perhaps because of, the soft investment markets, investment performance was rated as 6.18, down considerably from the 6.36 it garnered a year ago.
While the trend was noticeably downward, there was some upward movement in the rankings as well, as traditionally lower-ranked items gained ground on top-rated items. Still, while the top six items of selection importance each diminished in overall importance, plan sponsors rated their providers higher in every single service category save one compared with a year ago, a remarkable achievement. Perhaps most significantly, “responsiveness” garnered the second highest overall service ranking in this year’s survey, the first time the category has been included.
Not that there isn’t room for improvement, particularly in the participant services arena. While providers excelled in key processing performance metrics such as statement accuracy, payment turnaround, and reporting timeliness, the so-called “high touch” areas of participant contact drew the lowest ratings from plan sponsors.
A Lack of Clarity?
Clarity of participant statements was the only service category that fell in our rankings, and that only slightly (5.75 versus 5.76 a year ago). Still, in a ranking of nine key participant service projections, it managed to come in sixth. Even lower was participant communications materials, which, though ranked higher than last year, came in a disappointing eighth place.
The only service criteria ranked lower was “overall participant education program,” accorded a mere 5.43 ranking in its first year in the survey. “Call center support,” another new category, also turned in a dismal 5.68 rating in its survey debut. In sum, for all the much-ballyhooed focus on the participant, providers seem to be falling short – far short in some cases – of the expectations plan sponsors have for that level of support.
The proof may be in the pudding. While it may be a function of the uncertain economic environment, average plan participation rates dipped in every market segment in this year’s survey. Overall, participation rates hovered just below the 75% range across the board among this year’s respondent base – and that was down 2.5% on average compared to the 2001 survey. The largest plans, whose average participation rate slid nearly 6%, suffered the largest decline.
Not that plan sponsors have much to complain about on the cost front. More than half of this year’s respondents are paying $3 or less annually per participant for communications, and nearly 25% are paying $3 to $6. And, for the vast majority of plan sponsors, this fee has remained unchanged for the past two years. In fact, for 7% the fee has actually declined.
Tomorrow: Grand Designs