A Diversified Investment Advisors (DIA) study puts a number on workers dedicated to plan administration. More than four in 10 defined contribution plan sponsors dedicate the equivalent of 7.5 full-time human resources employees to the plan. Companies with small defined benefit programs ($50 million or less in assets) assign 7.5 or more employees to administration (including issuing benefit checks or dealing with employee beneficiary problems).
According to the DIA study, smaller defined benefit plans with a geographically dispersed workforce still have to dedicate a great deal of person power to administration. Forty-seven percent of plan sponsors with 25,000 employees or more, for example, have more than 25 locations with at least one human resources representative on location, causing a substantial decentralization of the human resource function.
DIA found that in the DB world, non-human resources departments are much more involved in plan management functions than they are in communications, education or benefit payment services. But that doesn’t mean HR officials sit on their hands, since DIA found that HR is still home to most plan management functions; some 89% of companies rely on HR for DB administration.
Specifically HR handles DB plan design changes (51%) and establishes plan investment objectives and asset allocation policies (42%). Meanwhile, finance or investment officials set up plan investment objectives (31%) while the finance staff helps review actuarial reports at 29% of the plans.
Other corporate entities involved in DB administration include:
- Finance, 56%
- Legal, 49%
- Accounting/payroll, 48%.
Not surprisingly, firms with both a DB and DC plan are much more likely to involve other departments in their DB administration than those with only the DB plan, the DIA study found. For example, accounting/payroll is involved in 54% of companies with both plan types but only about one in five firms with just a DB offering.
On the DC side, the primary responsibility for plan education and communications lies with the corporate or local HR department, particularly when creating employee communications on retirement benefits (61%), distributing communications pieces to non-participating workers (50%) and handing out communications to participants (48%).
The Diversified Investment Advisors’ Report on Retirement Plans was conducted by Diversified Investment Advisors and administered by LIMRA International and FGI Research, Inc. among US companies with at least 1,000 non-union employees, including 122 publicly traded and 84 privately owned firms.