Research

DATA & RESEARCH | PLANADVISER February 2017

2017 PLANADVISER Micro Plan Survey

Small plans are big business.

By Alison Cooke Mintzer See Archive >

Micro Industry Data

Type(s) of DC Plan(s) Offered
ALL MICRO<$1MM$1MM-$5MM
401(k)91%91%91%
403(b)6%5%7%
4574%3%5%
Money purchase1%1%1%
Profit sharing17%13%19%
ESOP1%0%2%
Nonqualified deferred compensation (NQDC)1%1%2%
SEP/SIMPLE IRA1%1%0%
Other3%3%3%
Adviser Use Among Plans
ALL MICRO<$1MM$1MM-$5MM
Yes59%47%64%
No41%53%36%
Adviser Fiduciary Status
ALL MICRO<$1MM$1MM-$5MM
Yes – 3(38) fiduciary15%11%17%
Yes – 3(21) fiduciary24%20%25%
No22%23%21%
Unsure/Don’t know40%46%37%
Common Adviser Services
ALL MICRO<$1MM$1MM-$5MM
Review of fund performance91%86%93%
Plan investment selection guidance90%82%92%
Evaluating/Explaining provider fees75%66%78%
One-on-one participant education75%66%77%
Group participant education72%64%74%
Provider selection/due diligence60%47%64%
Investment committee fund review58%42%63%
Plan compliance with laws and IPS56%44%59%
Benchmarking plan design56%42%60%
Creation/Monitoring of IPS49%39%52%
Plan Design Elements
ALL MICRO<$1MM$1MM-$5MM
Automatic enrollment25%24%25%
Automatic escalation15%15%16%
Investment policy statement42%28%49%
Loan provision70%68%71%
Safe harbor63%68%61%
Roth feature60%56%62%
Fee equalization policy12%7%14%
Auto-Enrollment Default Deferral Rate
ALL MICRO<$1MM$1MM-$5MM
<3%14%17%12%
3%40%36%42%
4%–5%20%19%20%
>5%15%16%15%
Re-Enrollment Actions Taken in Past 12–18 Months
ALL MICRO<$1MM$1MM-$5MM
Nonparticipants4%4%5%
Participants saving below default deferral1%1%2%
Participants not in default investment2%2%2%
No attempts to re-enroll any groups93%94%92%
Financial Education Offered by Employers
ALL MICRO<$1MM$1MM-$5MM
Investing basics/strategies22%17%24%
Saving and budgeting17%13%19%
Retiree health care planning8%5%10%
Credit/Debt management8%6%8%
Social Security strategies7%6%8%
Tax/Estate planning5%3%6%
Long-term care5%4%5%
College saving5%3%5%
Home buying4%3%4%
Participation Eligibility
ALL MICRO<$1MM$1MM-$5MM
Immediately upon hire19%19%19%
Within 3 months of hire24%23%24%
Within 4 to 11 months of hire16%16%16%
After 1 year from date of hire39%40%39%
After more than 1 year from date of hire2%2%1%
Matching Contribution Offered
ALL MICRO<$1MM$1MM-$5MM
Yes67%63%69%
No32%36%30%
Unsure/Don’t know1%1%1%
Approximate Maximum Match
ALL MICRO<$1MM$1MM-$5MM
More than 100% of first 6% of salary3%6%2%
100% of first 6% of salary9%9%9%
51%–99% of first 6% of salary39%42%37%
50% of first 6% of salary13%10%15%
Less than 50% of first 6% of salary6%6%6%
Other30%27%31%
Frequency of Matching Contributions
ALL MICRO<$1MM$1MM-$5MM
Annually 14%13%15%
Quarterly2%2%2%
Monthly3%3%3%
Twice monthly4%5%3%
Biweekly6%8%5%
Weekly69%65%71%
Other2%3%1%
Participants Maximizing Match
ALL MICRO<$1MM$1MM-$5MM
All or nearly all participants (>90%)32%38%30%
Vast majority (>75%–90%)23%21%24%
More than average (>50%–75%)19%13%22%
Less than average (>25%–50%)13%10%15%
A minority (10%–25%)5%7%5%
Very few (<10%)7%11%5%
“True-Up”* Provision for Matching Contributions
ALL MICRO<$1MM$1MM-$5MM
Yes16%14%17%
No48%40%52%
Unsure/Don’t know36%46%31%
*A true-up match may be used to restore matching contributions “lost” when an employee reaches the annual contribution limit prior to year-end.
When Participants Are 100% Vested
ALL MICRO<$1MM$1MM-$5MM
Immediately on enrollment33%39%30%
6 months1%1%1%
1 year6%9%5%
2 years2%3%2%
3 years9%8%9%
4 years4%3%4%
5 years23%19%25%
>5 years23%17%25%
Participants With Loans Outstanding
ALL MICRO<$1MM$1MM-$5MM
Average10%8%11%
Median6%2%8%
Participants Making Hardship Withdrawals
ALL MICRO<$1MM$1MM-$5MM
Average1%1%1%
Median0%0%0%
Number of Investment Options Offered
ALL MICRO<$1MM$1MM-$5MM
Average242524
Median212021
Number of Investment Options Held by Participants
ALL MICRO<$1MM$1MM-$5MM
Average555
Median444
Types of Investment Options Offered
ALL MICRO<$1MM$1MM-$5MM
Balanced fund(s)72%70%73%
Target-date funds68%65%70%
Money market fund65%64%65%
Target-risk funds51%50%52%
Stable value fund38%24%44%
Participant-managed account service33%28%34%
Real estate/REITs21%15%23%
Socially responsible fund(s)9%8%9%
Alternative investments5%5%4%
Employer stock1%1%1%
Results
ALL MICRO<$1MM$1MM-$5MM
Participation rate (average)76%75%76%
Participation rate (median)84%83%84%
Account balance (average)$70,453 $53,344 $78,534
Account balance (median)$50,000 $28,413 $57,155
Income-Oriented Products/Services Offered
ALL MICRO<$1MM$1MM-$5MM
In-plan: guaranteed monthly income**5%4%6%
In-plan: guaranteed minimum benefit***3%3%2%
In-plan: no guarantees5%5%4%
Out-of-plan: annuity purchase1%1%1%
No income-oriented products50%46%52%
Unsure of income product type39%43%38%
**E.g., deferred fixed annuities, guaranteed minimum income benefits (GMIBs).
***E.g., guaranteed minimum withdrawal benefits (GMWBs), deferred variable annuities.
Investment Vehicles Used in DC Plan
ALL MICRO<$1MM$1MM-$5MM
Mutual funds90%88%91%
Separate accounts18%17%19%
Collective investment trusts 6%5%7%
ETFs (outside of brokerage windows)12%13%11%
Self-directed brokerage window8%8%9%
Mutual fund window5%6%5%
Other5%5%5%
Frequency of Formal Review of Investment Options
ALL MICRO<$1MM$1MM-$5MM
Quarterly14%9%16%
Twice a year11%5%14%
Annually48%47%49%
Every 1 to 2 years9%10%8%
Every >2 to 3 years4%4%4%
Every >3 years3%4%3%
Never11%21%7%
Approximate Average Expense Ratio of Plan Investments
ALL MICRO<$1MM$1MM-$5MM
<0.25% (<25 bps)8%13%5%
0.25%–0.50% (25–50 bps)14%9%16%
>0.50%–0.75% (51–75 bps)10%8%11%
>0.75%–1.0% (76–100 bps)10%8%11%
>1.0%–1.5% (101–150 bps)9%8%10%
>1.5%–2.0% (151–200 bps)0%0%0%
>2.0%–2.5% (201–250 bps)0%0%1%
>2.5% (>250 bps)0%0%0%
Unsure/Don’t know47%53%44%
Frequency of Formal Review of Administrative Costs/Fees
ALL MICRO<$1MM$1MM-$5MM
Annually68%63%71%
Every 1 to 2 years12%12%12%
Every >2 to 3 years7%6%7%
Every >3 to 5 years2%2%2%
Every >5 years1%2%1%
Unsure/Don’t know10%16%7%
Paying for Plan’s Administrative/Recordkeeping Costs
ALL MICRO<$1MM$1MM-$5MM
Participants – via direct fees18%14%20%
Shared – participants and sponsors18%11%21%
Sponsor/Employer pays directly48%61%43%
None – fees paid by revenue sharing0%0%0%
Unsure/Don’t know11%12%10%
Total Plan Fees Calculated for the Prior Plan Year?
ALL MICRO<$1MM$1MM-$5MM
Yes, and we externally benchmarked our plan’s cost/fees as part of the process21%15%23%
Yes, and we plan to externally benchmark our plan’s cost/fees in the near future4%3%4%
Yes, but we did not externally benchmark our plan’s cost/fees15%12%16%
No, but we intend to calculate total fees in the next 6 months4%5%4%
No, but we may do it at some point in the future30%36%28%
Unsure/Don’t know26%30%24%
Length of Relationship With Provider
ALL MICRO<$1MM$1MM-$5MM
Up to 1 year6%9%5%
>1 year to 3 years15%19%13%
>3 years to 5 years16%16%15%
>5 years to 7 years13%11%14%
>7 years46%39%49%
Unsure/Don’t know3%4%3%
Frequency of Formal Review of Providers
ALL MICRO<$1MM$1MM-$5MM
Annually55%52%57%
Every 1 to 2 years11%12%11%
Every >2 to 3 years8%7%9%
Every >3 to 5 years5%4%6%
Every >5 years4%4%4%
Unsure/Don’t know16%22%13%
Investment Committee for the DC Plan
ALL MICRO<$1MM$1MM-$5MM
Internal employees only21%12%25%
External non-employees only3%2%3%
Employees and non-employees15%8%18%
Unsure of composition2%2%2%
No investment committee50%63%44%
Unsure/Don’t know9%12%8%
Number of Responsible Plan Fiduciaries (RPFs) in Plan~
ALL MICRO<$1MM$1MM-$5MM
One person28%35%25%
2 or 3 people44%31%50%
4 or 5 people5%3%6%
More than 5 people1%0%2%
Unsure/Don’t know21%31%17%
~408(b)2 defines an RPF as “a fiduciary with authority to cause the covered plan to enter into, or extend or renew, the contract or arrangement.” In other words, it is the person or committee who has the power to hire and fire the particular service provider, e.g., the broker/dealer, recordkeeper or registered investment adviser.
Investment Advice Offered
ALL MICRO<$1MM$1MM-$5MM
Financial planner/adviser – on-site42%31%47%
Financial planner/adviser – phone-based21%15%23%
Independent third party^11%8%12%
Provider’s proprietary services/tools22%18%24%
Through another source4%4%4%
Total offering advice71%61%76%
No advice offered29%39%24%
^E.g., Financial Engines, Morningstar.
Targeted Education/Communications to Participants About…
ALL MICRO<$1MM$1MM-$5MM
Rolling over past plan balances into current plan30%28%31%
Taking a pre-retirement distribution16%14%17%
Distribution/Rollover options upon separation35%29%37%
Income/Distribution options upon retirement18%15%20%
Level of Agreement (% agree or slightly agree)
ALL MICRO<$1MM$1MM-$5MM
Organization prefers past employees remain in plan20%17%21%
Most employees will achieve retirement goals by 6526%33%24%
DOL’s fiduciary rule will adversely affect plan sponsor service from advisers20%17%21%
DOL's fiduciary rule will adversely affect participant service from advisers25%24%26%
Success Measures Used
ALL MICRO<$1MM$1MM-$5MM
Participation rates44%32%49%
Deferral rates30%18%35%
Participants meeting income replacement goals3%1%3%
Participants saving to match10%6%12%
Participants with “appropriate” asset allocations4%3%4%
Participants increasing deferral rates in past year4%3%5%
Employee satisfaction with plan (through survey)14%12%14%
External/Competitive benchmarking of plan design11%6%13%
We have no formal plan success measures48%60%42%

For more information on detailed research available by plan size, industry or plan provider, please contact Brian O’Keefe at Brian.Okeefe@strategic-i.com.

Methodology

back to top

The following tables summarize provider service ratings in the micro-plan market—i.e., plans with less than $5 million in defined contribution (DC) assets. Recordkeepers qualified for award consideration by receiving a minimum of 25 total client responses from sponsors of micro plans.

If a recordkeeper received at least that many responses but fewer than the minimum number of service ratings within a specific service category, it was ineligible for awards only in that service category. “Best in Class” awards are based on an aggregated net satisfaction score ­derived from ratings of 56 areas of service.

The three highest net satisfaction scores in each of 22 major service categories earned a Best in Class Award, as did those providers with a net satisfaction score above the asset group’s benchmark of 60%. A “Service Commendation” was given to recordkeepers that did not receive Best in Class honors but exhibited strong client satisfaction within a service attribute. Specifically, providers needed to have 90% of clients either “completely” or “mostly” satisfied with a particular service offering to receive a Service Commendation