Survey Finds Asset Allocation Options Still Hot

April 8, 2008 ( - In the latest sign of the continued hot market for asset allocation funds, 77% of plan sponsors thinking about changing their default options have settled on risk-based or target-date funds, according to a new survey.

A Grant Thornton news release said its 2008 Plan Sponsor Retirement study also found that 72% of sponsors reported they are doing a good job in maintaining records that clearly document how decisions to choose or remove investment options have been made.

Some 82% of sponsors reported having an investment policy statement (IPS), with 45% of them being created by a consultant or adviser. Four in 10 respondents said they regularly reviewed their IPS to make sure they are on target.

“A sound investment policy is an invaluable tool for the effective management of a plan’s investment options with today’s supply of fund choices,” said Debbie Smith, an employee benefits practice partner with Grant Thornton LLP, in the announcement. “We’re encouraged by the sound practices of the plan sponsors we surveyed and the commitment shown to maintaining accurate records, which is vital to accountability of investment decisions. We’re interested to see the future effects of the PPA on default options in the coming years.”

Other study findings included:

  • Almost two out of five (39%) plan sponsors now offer automatic enrollment, and another fourth (27%) are considering adding it. The most common default deferral percentage is 3% (53%) when implementing automatic enrollment.
  • More than half of the plan sponsors surveyed (52%) likewise offer automatic rebalancing of participant investments.
  • The most common match rate is 25% or less (37%) followed by 51% to 100% (35%).
  • A majority of plan sponsors (53%) make investment advice available to participants, with one-third (31%) providing advice electronically. Seventy-three percent of plan sponsors are providing targeted participant education with almost all (87%) of that advice coming from third-party vendors or consultants.
  • More than three-quarters (77%) are funding contributions within two to three days of the date on which the payroll was paid.
  • Approximately one-third (32%) of the respondents still offer a defined benefit plan but the clear trend regarding benefits is for companies to move towards a 401(k) plan.
  • Only 17% of respondents have begun discussing with their auditors how they expect FAS 157 to impact financial statements and benefit plans.

The survey was conducted online from October through November 2007, with 183 independent plan sponsors participating. Participants in the survey primarily held chief financial officer (CFO) or human resources/benefits manager titles.