Data & Research November 22, 2008

More Sponsors Turning to Advisers

Even before the current market turmoil, plan sponsors were increasingly inclined to bring in some expert help.
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According to PLANSPONSOR’s 2008 Defined Contribution Survey, nearly three-quarters (roughly 71%) of nearly 6,000 plan sponsor respondents said they were offering participants some kind of help with making investment decisions – a marked improvement from the 65% in 2007.

Much of that assistance is coming from the DC provider (nearly 32%), while financial planners/advisers outside the plan also represent a significant block (roughly 27%); both improved their representation from the 2007 findings (28.5% and 23.4%, respectively).

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Sixty-one percent of plans surveyed relied on the assistance of a financial adviser, compared with just 55% a year ago (and 47% two years ago). Among plan sponsors choosing not to offer advice to participants, fiduciary concerns continue to dominate the rationale, though just 60% cited that factor this year compared with 66% a year ago. The other criteria—lack of interest from employees (25.1%), fees (25%), and lack of support from management (15.1%)—were largely unchanged in weighting from a year ago.

Investment Options

As for what they were offering help with, it is interesting to note that the average number of funds offered was down in this year’s survey—to 18.8 this year from 21.1 a year ago—though that was in line with the 18.1 offered in the 2006 results. On the other hand, the number of funds actually held by participants was unchanged at 5.2 (the median, by the way, was an even more modest 4.2, down from 5.0 in last year’s survey).
More employers reviewed their plan investment options quarterly (31.1%) than did so a year ago (28.4%), while slightly fewer did so on an annual basis than a year ago (37.5% compared with 40%). On the other hand, there was little change in the number of plans that had an investment committee in place to review those options, or in the composition of the committee. In this year’s survey, roughly 71.4% had one, compared with 71.8% a year ago. However, the number of plans with an “internal only’ committee dipped to 55.6% from 57% in 2007.
When it comes to evaluating their DC providers, only about one in four (29%) does so annually, though that is the most common frequency cited. The next most common response (nearly 23%) did so “every three to five years,” while about 15% did so every two to three years, and one in eight was on a one- to two-year cycle. Nearly 11% did so every five years (or more), and nearly one in 10 said they “never” formally evaluated the provider.
While there were signs of less contentment (see IMHO: Content Ed), the vast majority—86% of respondents—said that they would recommend their current provider to a colleague; while that was lower than the 89% of a year ago, the decline was relatively modest. One in 10 respondents to this year’s survey were not sure if they would recommend (up slightly from 8.3% a year ago), while 4.0% in this year’s survey said they would not, compared with 2.7% a year ago.
Survey Says
Each year PLANSPONSOR magazine asks plan sponsors to rate their current defined contribution services provider in a variety of categories. In order to qualify for rating in the survey, providers needed a minimum of 35 total client responses, and at least 15 client responses in any asset category to be rated in that category.
Quartiles for participant services and sponsor services were calculated in each asset category in which a provider qualified for a rating. The score for participant services in each provider’s listing comprises the cumulative average of 13 categories, and sponsor services comprises 10 categories (see Best in Class charts for the individual categories). The percentage score next to the quartile for each provider in each asset category represents the cumulative score out of 100%. For example, an average score of 6.82 out of a possible 7.00 for participant services in the small market would translate to 97.4%.
Best in Class providers can be found in each market segment as follows:
Mid:
Or, you can find links to the providers you work with – or are thinking of working with HERE
IMHO November 22, 2008

IMHO: Thanks Giving

Thanksgiving has been called a “uniquely American″ holiday.
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While that is perhaps something of an overstatement, it is unquestionably a special holiday, and one on which it seems a reflection on all we have to be thankful for is fitting.
Here’s my list for 2008:
I’m thankful that the election is over—and that the results were determined on Election Day (for the very most part). I’m thankful that so many made the effort to vote—and that, regardless of whether or not one always agrees with the outcome, we have the ability to do so.
I’m thankful that our nation has passed yet another September 11 without a terrorist attack on our soil—and thankful to the leaders of this great nation, and to the men and women in our armed forces, intelligence agencies, and Homeland Security for their continued sacrifices in keeping us safe.
Closer to “home,’ I’m once again thankful that so many in Washington are concerned about the current state of employer-sponsored retirement plans, and the importance of fee disclosure—and once again (still?) just a tad worried that some of that concern will find form in a bad solution. I’m encouraged that we’re looking for new ways to replace the integrity of that fabled three-legged stool.
I’m thankful that, having figured out constructive (and voluntary) ways to get people into these programs—through devices like automatic enrollment—we are now focusing on how to help make sure they are saving and investing appropriately—through devices like contribution acceleration and asset allocation solutions. I’m also thankful that we’re seeing a growing number of retirement-income solutions come to market—because, after all, being able to live off what you have saved is what it is all about.
I’m thankful we have retirement savings accounts big enough for a 40% loss to hurt—but, of course, will be even more thankful when those “paper losses’ disappear. I’m thankful we are talking about things like suspending the required minimum distribution rules to soften the blow, if not quite as sure that taking down the barriers on hardships and loans is a good idea. I’m thankful that so many employers remain committed to making those company matches that surely do so much not only to encourage the savings of workers, but also to help close the gap in savings adequacy.
I’m also thankful that so many employers have remained committed to their defined benefit plans and—certainly ahead of the market turmoil of recent weeks—had made serious, consistent efforts to respond to the new funding challenges imposed by the Pension Protection Act. I’m hopeful that lawmakers also will respect those efforts—and will give those programs the extra breathing room they have surely “earned’ on the implementation date of some of those new rules.
I’m thankful that the “waiting’ on implementation under the final 409A and 403(b) regulations is nearly over. I’m appreciative of the “patience’ of regulators on those critical issues, their willingness—particularly the Internal Revenue Service on 403(b)s—to work so hard to assuage employer concerns ahead of that implementation date.
Finally, I’m thankful for the home I have found at PLANSPONSOR and then with PLANADVISER, and the warmth with which its loyal readers have embraced me, as well as the many who have “discovered” us during the past nine years. I’m thankful for all of you who have supported—and I hope benefited from—our various conferences, designation program, and communications throughout the year. I’m thankful for the constant—and enthusiastic—support of our advertisers.
But most of all, I’m once again thankful for the unconditional love and patience of my family, the camaraderie of dear friends and colleagues, the opportunity to write and share these thoughts—and for the ongoing support and appreciation of readers like you.
Thank you!

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