Nearly 85% said they thought the fees charged by their provider were “fair,” a finding even higher than last year’s results. Some of that may be comfort – after all, nearly two-thirds said that their administrative fees had not changed in the past two years, while 18.4% said they had decreased during that period.
On the other hand, nearly 12% of our survey respondents “didn’t know” if their fees were fair – and more than 17% of those with less than $5 million in assets had that assessment, suggesting that disclosure is not the equivalent of clarity – and that disclosure may not be all that plan sponsors would like.
An Itch in Time?
Plan sponsors continued to evidence a great deal of loyalty to their defined contribution providers. Nearly 40% had been with their current provider for more than five years, and another 19% had racked up 3 to 5 years of tenure. Roughly a third had been with their current provider for three years or less – the traditional “itching” ground where sponsors are inclined to make a change – and 9% were still in their “honeymoon,” a year or less.
Of those that had made a change within the last two years, poor service was overwhelmingly cited as the primary cause by more than 40% (including processing errors). That was nearly twice the 24% that cited a lack of product features, and the 17% that credited fees.
When it comes to reevaluating providers, survey respondents were no more – or less – inclined to formally evaluate their defined contribution provider. One in five did so once a year, but over half (54.6%) did so on an “as necessary” basis. Both results – as well as the 13% that did so every 1-2 years, and the 11% that did so every 2-3 years – were consistent with last year’s findings.
Most plan sponsors, roughly two-thirds, said that the range of services has increased and/or improved over the past two years. On the other hand, just a year ago more than three-fourths registered that opinion.
Additionally, perceived service levels were, to a large extent, directly correlated with plan size. For example, only about half (56%) of those plans with less than $5 million in assets said service range had expanded over the past two years, compared with more than 70% of those with between $5 and $50 million, and about 80% of plans with more than $500 million in plan assets.