Recordkeeping Survey


More from Less

Our 2015 recordkeeping survey profiles 66 providers seeking to capture sponsor attention with the right balance of value and service.

Over the past 40 years, defined contribution (DC) plans have grown to be the cornerstone of retirement saving for millions of Americans; over the past 17, our annual PLANSPONSOR Recordkeeping Survey has chronicled the market’s impressive growth. Compared with 10 years ago, total defined contribution assets have more than doubled—up 126% from $2.67 trillion to $6.02 trillion—while plans and participant counts have grown by “only” 62% and 35%, respectively.

Yet, despite having more assets, more plans and more participants than at any time in history, there is one measure of the market that continues to decline: the number of recordkeeping service providers. After a year that saw several  headline-grabbing mergers, our 2015 survey received just 66 responses—about 20% fewer than the record-setting 83 providers that responded in 2006. Although a few have been rebranded, many of the largest providers remain, and collectively the group has grown even larger and more influential over the years, as 20 recordkeepers now account for 87.7% of defined contribution assets—up from less than 75% in 2005.

The good news for plan sponsors and participants is that a market dominated by fewer, stronger competitors has created an environment where recordkeepers are racing to deliver more value for less cost, which is inspiring the next generation of product and service offerings.

Nowhere has the “value for cost” equation been more evident than in the area of participant service. Not so long ago, phone-based channels such as call centers and voice recognition systems dominated participant interactions. But, as noted by Moore’s Law, technology moves at a very fast pace. Today 78.3% of all contacts happen via the participant website, so it stands to reason that providers will continue to turn to technology as a source of future innovation/differentiation.

For example, mobile offerings, which account for 6.7% of participant interactions, are now only slightly less important than call centers (6.9%) in terms of reach. Overall, 92% of recordkeepers have either a mobile-optimized website (35%) or a participant application (app) (57%). To date, mobile functionality has been limited; most mobile apps are able to display account balances (85%) or show account transactions (71%), while less than four in 10 support basic actions such as changing deferral rates (38%), and even fewer allow for updating of contact information (26%) or beneficiaries (15%).

One of the biggest transformations in recent years has been the shift from an exclusive focus on account balances to  how those balances translate into retirement income. Recordkeepers have almost universally embraced this change, with 95% now offering retirement income estimates. Participant websites (73%) and statements (54%) are the most common locations for such figures.

However, sponsors should be wary of what assumptions are used to calculate the estimates, as there are many factors involved and conservative or aggressive assumptions can have a material impact on the outcome. For example, recordkeeper respondents to our  survey were in general agreement over the age at which participants will retire—either 65 or 67—but had significant variance in the age at which they will stop receiving distributions: a minimum of 84, maximum of 97 and median of 90. Baseline assumptions can often be customized based on plan/participant preferences, but they can also contribute to poor decisionmaking if not fully understood.

While participants are the ultimate “customer” in the defined contribution market, sponsors are the “buyers,” and recordkeepers offer a wide range of services designed to reduce the burden of plan administration and oversight. Nearly all (88%) of the surveyed recordkeepers can deliver signature-ready Form 5500 tax forms, and most (71%) have in-house Employee Retirement Income Security Act (ERISA) counsel to offer guidance if and/or when needed.

In the end, sponsors have many choices when selecting a recordkeeper for their DC plan. Some deliver more services while others offer the promise of less cost. The challenge sponsors face is finding the right balance that aligns with their plan’s needs.

Art by Victo Ngai

Art by Victo Ngai