Service Tops Plan Sponsor Selection Criteria

December 4, 2000 ( - Participant services are once again at the top of plan sponsor hiring considerations, but quality of plan sponsor services was a close second, according to PLAN SPONSOR's 2000 Defined Contribution Services Survey.

Service considerations continued to gain in importance, pulling away from criteria such as investment performance, variety of investment options, and even fees as a key consideration in picking – or keeping – a service provider.

On a scale of 1-7, with 7 representing “extremely important,” plan sponsors ranked Quality of Service to Participants as a 6.56, with Service to Sponsor close behind at 6.40, on average. Service topped the list of considerations for plan sponsors of all sizes in the survey of nearly 1,500 plan sponsors across the country.

In fact, the number one reason for changing providers were processing errors and poor service, cited by nearly 20% of plan sponsor respondents.

Service “Station”

All other service criteria slipped in terms of overall weighting compared with the findings of 1999’s survey.
Investment performance ranked third in overall importance, but it was significantly more important to small plan sponsors. Cited as “extremely important” by over half (52%) of those plans with $50 million or less in assets, only 40% of those with $50 – 200 million in assets categorized it as such – and just a third (34%) of those with more than $200 million.

Similarly, while just a quarter (25.9%) of the largest plan sponsors considered the variety of investment options a key criterion, nearly 40% of those with less than $50 million in plan assets considered it extremely important. Variety of investment options was fifth on the overall list.

Financial strength of the provider was ranked fourth, with a 6.15 average weighting. 
Fees may have been well down the list, but a solid 2/3 of plan sponsors said it was “extremely important” in evaluating a plan provider. However, it fell in importance from a 6.0 weighting in last year’s survey to just 5.81 in the 2000 ranking.

Brand name funds, cost/fees and market image also slipped from last year’s weighting. 

– Nevin Adams