2020 Defined Contribution Trends Survey - Research - Callan

Page created by Mitchell Logan
 
CONTINUE READING
2020 Defined Contribution Trends Survey - Research - Callan
Research

2020 Defined Contribution
Trends Survey
Table of Contents

                    Key Findings                                          2

                    Respondent Characteristics                            4

                    Plan Structure: Bundled vs. Unbundled Arrangements   6

                    ERISA Section 404(c) Compliance                       7

                    Investment Policy Statement                           8

                    Fee Policy and Use of Investment Consultants         9

                    DC Plan Measurement                                  10

                    Fiduciary Positioning                                11

                    Areas of Focus                                       12

                    Company Match                                        13

                    Automatic Features                                   14

                    Roth Features                                        17

                    Company Stock                                        18

                    Investments/Target Date Funds                        21

                    Investment Advisory Services                         33

                    Post-Employment Assets                               36

                    Plan Leakage                                         37

                    Retirement Income Solutions                          38

                    Fees                                                 40

                    Participant Communication                            47

                                                                          1
Key Findings

Callan conducted our 13th annual
Defined Contribution (DC) Trends
                                                Top 2020 Priorities                         2020 area of                          95% of plans offer
                                                1 Plan fees
                                                                                            communication
Survey in the fall of 2019. The survey                                                                                            advisory services
                                                                                            focus:

                                                  2 communication
incorporates responses from 114 plan
                                                      Participant                                                                 Most popular services:
sponsors, including both Callan clients                                                     Financial                             Online advice

                                                3 Manager                                   Wellness
and other organizations. We highlight
                                                            due                                                                   On-site seminars
key themes and findings from 2019                 diligence                                                                       Guidance
and expectations for 2020.                                                                              See page 47 for details
                                                              See page 12 for details                                                           See page 33 for details

   86%                                                                                                                            63%
                                                      93%
   offer a 401(k) plan                                                          of plans have a                                   have a policy on asset
                                                                                target date fund                                  retention
                             65%                                                                                                  75%      of those focus on
    with > $1 bn in assets                                                                                                                 retaining assets
                       See page 4 for details                                                                                                   See page 36 for details
                                                                                 77%
                                                                       offer a target date fund
                                                                       that is at least partially
   Most important
   step in improving                                       77%
                                                                                indexed
                                                                                                     17%
                                                                                                 use a custom
                                                                                                                                  89%
   fiduciary position                               use a target date fund                      target date fund                  have taken steps to
                                                     offered by someone
   for fourth year in a row:                                                                                                      prevent plan leakage
                                                        other than their                            21%   plan to
                                                         recordkeeper
   Reviewing                                                                                         in 2020                      Most common step:
   Plan Fees                                                                                                                      Offer partial distributions
   See page 11 for details                                                                      See pages 22 & 23 for details                   See page 37 for details

                                                                                                                                                                          2
Key Findings

     80%                                                                                                                           87%
                                                                                         of plans use explicit
                                                   Fee                             65%   per participant fees
                                                   Payment
        of plans use                               Trends                          12%
                                                                                         of plans use revenue
                                                                                         sharing as sole
                                                                                                                                  of plans now offer
   institutional vehicles                                                                                                         a Roth feature, an
                                                                                         payment method
                                                                                                                                     all-time high
             See page 28 for details            See page 43 for details                                                                      See page 17 for details

                                                                                                                             Calculating and
                                                                                     Top factors for measuring

   9/10
                                                                                                                             benchmarking fees
                                                                                     plan success

                                                                                     Participation                           89%    benchmark fees
   plan sponsors say they engage
   an investment consultant                                                              Contribution Rate                   56%
                                                                                                                                    likely will conduct a fee
                                                                                                                                    study in 2020
                                                                                            Investment
                                                                                                                                    do not know or do not
                                                                                            Performance                      47%
                             22%                                                                                                    evaluate indirect revenue
                                                                                                   See page 10 for details
                       reported using a
                      3(38) discretionary

                                                                                           1 in 4
                            adviser                                                                                          Focus on fees in 2020
                                                                                                                                    plan to switch to lower-
                                                                                                                             67%    fee share classes
                                            18%                                                                                     plan to renegotiate
                                       are unsure if their                                                                   50%    manager fees
                                        consultant has
                                        discretion over                                 intend to conduct a                         plan to renegotiate
                                            the plan                                                                         45%    recordkeeper fees
                                                                                    recordkeeper search in 2020
                                                          See page 9 for details                   See page 46 for details            See pages 40, 41, 46 for details

                                                                                                                                                                       3
Respondent Characteristics

Callan conducted our 13th annual Defined
Contribution (DC) Trends Survey online in           Primary DC plan offered                    Number of participants           Plan assets
September and October of 2019. The survey
                                                           Profit Sharing 0.9%
incorporates responses from 114 DC plan             100%

sponsors, including both Callan clients and other          401(a) 9.6%
                                                                                                       >100,000 7.9%
organizations.
                                                           403(b) 3.5%                                 50,001 to 100,000 8.8%       >$5 billion 27.4%
As in prior surveys, the majority of respondents
offered a 401(k) plan as the primary DC plan.
The proportion of 401(k) plans in the survey
remained largely the same as last year—85.8%
in 2018 and 86.0% in 2019.                                                                             10,001 to 50,000 41.2%

More than 90% of plans in the survey had over                                                                                        $1 to $5 bn 37.2%
$100 million in assets; moreover, 64.6% were
“mega plans” with more than $1 billion in assets,
                                                           401(k) 86.0%
a slight increase from 2018.
                                                                                                       5,001 to 10,000 10.5%

                                                                                                                                    $501 mm to $1 bn 9.7%

                                                                                                       1,001 to 5,000 21.9%          $201 to $500 mm 12.4%

                                                                                                       501 to 1,000 0.9%            $101 to $200 mm 5.3%
                                                                                                                                    $51 to $100 mm 0.9%
Respondent Characteristics (continued)

About 3 in 10 (29.8%) DC plan sponsors
surveyed offered an open defined benefit (DB)        Sponsors’ industry                            Does employer also offer a DB plan?
plan, compared to 35.8% in 2018. Both figures,
however, are significantly lower than the 46.0%
figure in 2017, largely explained by the exclusion        Health Care 14.0%
of governmental entities since then.                                                                       Yes, but it is     Yes
                                                                                                             frozen           29.8%
                                                                                                             24.6%
Respondents spanned a wide range of                       Financial Services 14.0%
industries; the top were health care, financial
                                                                                                                                      Don’t know
services, energy/utilities, technology, and                                                                       No/Closed
                                                                                                                                      0.9%
                                                                                                                  44.7%
manufacturing.
                                                          Energy/Utilities 13.2%

                                                          Technology 9.6%

                                                          Manufacturing 9.6%

                                                          Professional services 5.3%

                                                          Not for Profit 5.3%
                                                          Insurance 5.3%
                                                          Retail 4.4%
                                                          Aerospace/Defense 4.4%
                                                          Construction/Mining 2.6%
                                                          Automotive 2.6%
          Health Care plans increased by                Additional categories: Education (2.6%),
                                                        transportation (2.6%), other (2.6%),
          two-thirds from 2018                          telecommunications (1.8%).

                                                                                                                                                   5
Plan Structure: Bundled vs. Unbundled Arrangements

While the proportion of plans that were at least     Plan structure
partially bundled rose from last year, the number
                                                                                                                0.9%
of plans that identified themselves as being fully   100%
                                                                                                                11.5%                      Multiple recordkeepers and/or
bundled (11.5%) was the lowest in survey                                                                                                   custodians
history. This reflects a larger unbundling trend                                                                            42.5%
                                                      75%                                                                   Unbundled
                                                                                                                31.0%                      Fully unbundled but use same
we have observed over time.
                                                                                                                                           vendor for multiple functions

Fewer than 1 in 10 (6.8%) mega plans (assets          50%                                                                                  Fully unbundled
greater than $1 billion) had a fully bundled                                                                    45.1%
                                                                                                                            56.6%
structure. Conversely, 56.2% of mega plans            25%                                                                   Bundled        Partially bundled
were unbundled. About half of mid-sized plans
($100-$500 million in assets) reported using a                                                                  11.5%
                                                       0%                                                                                  Fully bundled
partially bundled structure, whereas 25.0%               2012     2013      2014   2015     2016    2017     2018    2019
indicated they utilized a fully bundled structure,
up from 15.0% in 2018.

                                                     Fully bundled: The recordkeeper and trustee are the same, and all of the investment funds are managed by
                                                     the recordkeeper.

                                                     Partially bundled: The recordkeeper and trustee are the same, but not all of the investment funds are managed by
                                                     the recordkeeper.

                                                     Fully unbundled: The recordkeeper and trustee are independent, and none of the investment funds are managed
                                                     by the recordkeeper.

                                                                                                                                                                           6
ERISA Section 404(c) Compliance

Nearly 4 in 5 (79.5%) DC plan sponsors said            Steps in past year to ensure ERISA Section 404(c) compliance*
they took steps within the past 12 months to           65%

ensure ERISA Section 404(c) compliance.
                                                       55%

                                                                57.8%
More than half of respondents (57.8%) personally
reviewed compliance. Many plans engaged third          45%

parties to review 404(c) compliance, including their
attorney (40.2%) and their consultant (36.3%).         35%
                                                                                      40.2%
                                                                                                      36.3%

While the percentage that did not know what steps      25%

had been taken to ensure compliance increased—
from 10.6% in 2018 to 17.6% in 2019—the                15%

                                                                                                                   17.6%
proportion of respondents that took no action at all
                                                                                                                                 2.9%      2.9%
fell by more than half (6.4% in 2018 vs. 2.9% in
                                                       5%

2019).
                                                       -5%
                                                             Plan sponsor        Attorney review   Consultant   Don't know   Other      None
                                                             review                                review

79.5% took steps
to ensure compliance

                                                       *Multiple responses were allowed.

                                                                                                                                                  7
Investment Policy Statement

The overwhelming majority of DC plans                  Does DC plan have an IPS?
maintained an investment policy statement (IPS)
                                                                                                                                 0.9%
in 2019 (93.8%), a slight increase from 2018            100%
                                                                                                                                 5.3%        Don't know
(90.5%).
                                                                                                                                             No
                                                        75%
About two-thirds of respondents with an IPS
indicated it included a watch list, while the other                                                                                          Yes
one-third indicated that it did not.                    50%
                                                                                                                                 93.8%

Additionally, about two-thirds (66.7%) of plan          25%
sponsors reviewed their IPS in the past 12
months, and half reviewed and updated it over
                                                         0%
that same time period. Although the percentage             2015               2016                2017              2018              2019
of sponsors that reviewed their IPS during this
timeframe increased from 2018 (64.8%), the
percentage that also updated the IPS slightly          Last time the IPS was reviewed or reviewed and updated
decreased (52.4%).                                      75%
                                                                   66.7%
                                                        65%                                                                                  Total
Best practice dictates a review of the IPS on a
                                                        55%        16.7%                                                                     Reviewed only
regular basis (i.e., once per year), particularly if
                                                        45%                                                                                  Reviewed and updated
changes are made to the DC plan.
                                                        35%
                                                                                         22.8%
                                                        25%        50.0%
                                                                                          6.1%               8.8%
67.0% of those with an IPS include                      15%
                                                                                         16.7%
                                                                                                             0.9%                1.8%
                                                        5%                                                   7.9%                1.8%
a watch list
                                                        -5%    Within past year      1 - 3 years ago     More than 3 years   Don’t know
                                                                                                         ago

                                                                                                                                                                8
Fee Policy and Use of Investment Consultants

                                                   Do you have a written fee payment policy documenting your approach to payment of
More than 6 in 10 (62.0%) plan sponsors
                                                   plan fees?
surveyed had a written fee payment policy in
place, either as part of their investment policy    100%                                                           0.9%          Other
                                                                                                           5.6%
statement (32.4%) or as a separate document
                                                                                                           29.6%                 Don't know
(29.6%). This number is up considerably from        75%
the 46.0% that reported having a written fee                                                               1.9%                  No
policy in 2018.                                     50%
                                                                                                           29.6%                 No, but plan to in the next 12
                                                                                                                                 months
                                                                                                                      Total      Yes, as a separate document
Nearly 9 in 10 (89.2%) plan sponsors said they      25%                                                               Yes
engage an investment consultant. This figure is                                                            32.4%
                                                                                                                      62%        Yes, as part of the investment
up from 2018 (84.1%) and is the highest in           0%                                                                          policy statement
survey history. Of those that utilize an               2015              2016          2017         2018       2019
investment consultant, 60.2% reported using
only a 3(21) non-discretionary adviser. The        Do you use an investment consultant (either
percentage of sponsors that used a 3(38)
                                                   project or retainer)?                                     Type of consultant used*
discretionary adviser, either exclusively or               Don't know           No      Yes
partially, rose from 15.9% in 2018 to 21.6% in     100%                                          5.9%                                    3(21) non-
2019.                                                                                            4.9%                                    discretionary adviser

                                                    75%
                                                                                                                       60.2%             3(38) discretionary
A notable portion of sponsors (18.2%) were
                                                                                                                                         adviser
unsure which type of consultant they use.
                                                    50%
                                                                                                 89.2%                                   3(21) and 3(38)
 3(38) discretionary consultant: Selects and                                                                            6.8%             advisers
                                                    25%                                                                14.8%
 monitors funds and acts as a co-fiduciary (also
                                                                                                                                         Unsure whether 3(21)
 known as OCIO).
                                                                                                                       18.2%             or 3(38) adviser
 3(21) non-discretionary consultant: Monitors       0%
                                                      2015        2016          2017      2018      2019
 and recommends changes as a co-fiduciary, while                                                               *Retainer/ongoing basis only.

 the plan sponsor selects investments.

                                                                                                                                                                  9
DC Plan Measurement

In line with the past three years, plan sponsors   Criteria to measure plan success
rated participation rate/plan usage as the most
important determinant for measuring the success                       2016                         2017                             2018                        2019                        Rating
of their DC plan.                                                     Participation rate/          Participation rate/              Participation rate/         Participation rate/          4.4

                                                    Most important
                                                                      plan usage                   plan usage                       plan usage                  plan usage
Contribution/savings rate was the second most                                                                                       Contribution/                                            3.7
                                                                      Contribution/                Investment                                                   Contribution/
important factor, followed by investment                              savings rate                 performance                      savings rate                savings rate
performance and cost effectiveness.
                                                                      Investment                   Contribution/                    Cost-effectiveness          Investment                   3.3
                                                                      performance                  savings rate                                                 performance

                                                                      Cost-effectiveness           Cost-effectiveness               Investment                  Cost-effectiveness           3.2
                                                                                                                                    performance

                                                                      Investment                   Retirement income                Employee satisfaction       Ability to attract/retain    3.1
                                                                      diversification              adequacy                                                     employees

                                                                      Retirement income            Investment                       Retirement income           Investment                   3.0
                                                                      adequacy                     diversification                  adequacy                    diversification

                                                                      Employee satisfaction        Employee satisfaction            Investment                  Retirement income            3.0
                                                                                                                                    diversification             adequacy

                                                                      Avoidance of fiduciary       Avoidance of fiduciary           Avoidance of fiduciary      Employee satisfaction        3.0
                                                    Least important

                                                                      issues                       issues                           issues

                                                                      Benchmark against            Benchmark against                Ability to attract/retain   Benchmark against            2.9
                                                                      other plans                  other plans                      employees                   other plans

                                                                      Ability to attract/          Ability to attract/              Benchmark against           Avoidance of fiduciary       2.9
                                                                      retain employees             retain employees                 other plans                 issues

                                                                      (5=Most important. Total rating is weighted average score.)

                                                   Additional categories (2019): Simple to administer (2.0); other (0.6) don’t measure (0.3); don’t know (0.2).

                                                                                                                                                                                                10
Fiduciary Positioning

For the fourth year in a row, plan sponsors           Rank of actions taken to improve fiduciary positioning
ranked reviewing plan fees as the most
important step they took over the past 12 months                          2016                         2017                             2018                    2019                   Ranking
to improve the fiduciary position of their DC plan.                       Reviewed plan fees           Reviewed plan fees               Reviewed plan fees      Reviewed plan fees         4.0

                                                       Most important
This action ranked significantly higher than any
other activity undertaken.                                                                                                              Implemented, updated    Implemented, updated,
                                                                          Updated or reviewed          Updated or reviewed                                                                 2.1
                                                                          IPS                          IPS                              or reviewed IPS         or reviewed IPS
Implementing, updating, or reviewing the
                                                                          Reviewed compliance          Conducted formal                 Conducted plan audit    Conducted formal           1.9
investment policy statement came in second.                                                            fiduciary training                                       fiduciary training
Conducting formal fiduciary training ranked third,
                                                                          Conducted formal             Changed investment               Changed investment      Replaced fund              1.7
followed by replacing fund manager(s),
                                                                          fiduciary training           menu                             menu                    manager(s)
conducting a plan audit, and reviewing
compliance.                                                               Changed investment           Conducted plan audit             Conducted formal        Conducted plan audit       1.5
                                                                          menu                                                          fiduciary training

                                                                          Replaced fund                Reviewed compliance              Reviewed compliance     Reviewed compliance        1.2
                                                                          manager(s)                   with fiduciary rule

                                                                          Other (e.g., plan audit,     Replaced fund                    Replaced fund           Changed investment         1.1
                                                                          operational processes)       manager(s)                       manager(s)              menu

                                                                          Reviewed/changed             Audited security                 Audited security        Audited security           0.8
                                                       Least important

                                                                          QDIA                         protocols                        protocols               protocols

                                                                          Audited security             Changed/hired                    Reviewed/changed        Reviewed/changed           0.6
                                                                          protocols                    investment consultant            QDIA                    QDIA

                                                                          Changed communi-             Reviewed/changed                 Changed/hired           Other (e.g., operational   0.6
                                                                          cation approach              QDIA                             investment consultant   processes)

                                                                         (5=Most important. Total ranking is weighted average score.)

                                                         Additional categories (2019): Changed/hired investment consultant (0.4); evaluated/implemented 3(38) discretionary services (0.3);
                                                         implemented a written fee payment policy statement (0.2); changed recordkeeper (0.1); changed trustee/custodian (0.1).

                                                                                                                                                                                              11
Areas of Focus

Plan fees and participant communication are the       Rating of primary areas of focus over the next 12 months
most likely primary areas of focus over the next 12
                                                      5=most important. Total rating is the weighted average score.
months. These two areas were also rated first and
second in last year’s survey.                                                                                   1       2           3       4       5                   Rating

                                                                                           Plan fees    8.0% 13.3%          16.0%       24.0%                   38.7%    3.5
Fund/manager due diligence and financial wellness
were the next two highest areas of focus for 2020,
followed closely by retirement readiness and                             Participant communication      11.7% 3.9%          27.3%               29.9%           27.3%    3.5
investment structure.

                                                                       Fund/manager due diligence       5.7% 12.9% 18.6%                    31.4%               31.4%    3.3
Cybersecurity, a newsworthy topic, increased
slightly in priority from last year.
                                                                                 Financial wellness     10.1%       17.7%       24.1%               26.6%       21.5%    3.3

                                                                              Retirement readiness      5.5% 6.9%           37.0%                   32.9%       17.8%    3.2

                                                                               Investment structure
                                                                                                        7.6% 7.6% 22.7%                     30.3%               31.8%    3.1
                                                                 (e.g., number, types of funds, etc.)

                                                                                      Cybersecurity     10.3%       16.2%      23.5%                30.9%       19.1%    2.9

                                                                                Quality of providers
                                                                                                        10.0% 6.7% 20.0%                28.3%                   35.0%    2.8
                                                              (e.g., recordkeeper, legal, consulting)

                                                       Plan design/features (e.g., level of company
                                                                                                        14.1%        14.1%          26.6%           20.3%       25.0%    2.7
                                                           match, offer automatic enrollment, etc.)

                                                                              Committee education       6.7% 11.7%              41.7%                   26.7%   13.3%    2.5

                                                                                                                                                                               12
Company Match

In 2019, 13.8% of plan sponsors made a change      Company match actions*
to their company match policy, which was down
                                                   Past 12 months                                                     Next 12 months
from last year’s figure (21.7%). Of those that
made a change, the most common action was           Restructured                                           41.7%       Don't know                                              54.2%
restructuring the match (41.7%).

                                                    Made one-time employer contribution                    25.0%       Increase                                                16.7%
Nearly a third anticipate making a change in
2020. While many are unsure what that change
will be, 16.7% plan to increase the match. In       Added match true-up feature                            25.0%       Change to stretch match                                 16.7%
contrast, no plans reported that they plan to
eliminate or reduce the match.
                                                    Reinstated                                             16.7%       Make one-time employer contribution                     12.5%

Among those that plan to change to a stretch
match, one reported a stretch match formula of a    Increased                                              16.7%       Add match true-up feature                               12.5%
50% match up to 8%.
                                                    Changed to stretch match                               16.7%       Reinstate                                                4.2%

                                                    Reduced                                                  8.3%      Restructure                                              4.2%

                                                    Changed timing                                           8.3%      Change timing                                            4.2%

13.8% made changes in 2019
                                                    Other                                                    8.3%      Other                                                    4.2%

29.3% expect to make a change
in 2020
                                                   Additional categories with 0.0% (2019): Eliminated, moved to safe harbor design, don’t know. Additional categories with 0.0% (2020):
                                                   Eliminate, reduce, move to safe harbor design.
                                                   *Percentages out of those taking steps with respect to the company match. Multiple responses were allowed.

                                                                                                                                                                                      13
Automatic Enrollment

Automatic enrollment has seemingly reached                 Plans offering automatic enrollment
saturation, remaining at around 7 in 10 plans for
the past four years. Automatic enrollment is most
                                                                                                                                             96.8%
prevalent in the telecommunications,
                                                               69.7%             71.4%                70.0%            70.7%
manufacturing, and technology industries.
                                                                                                                                                          12.7%          6.3%           3.2%
Of those that do not automatically enroll
employees, 5.6% report that they are very likely
                                                     1.5          2        2.5      3          3.5       4       4.5     5      5.5

                                                                2016              2017                2018             2019                 For new     One-time       Periodic      Catch up
to implement this feature in 2020. The plans that                                                                                           hires       sweep          sweep
do not offer auto enrollment span plan sizes and                                                                                           Note: Multiple responses were allowed.
industries.
                                                           If automatic enrollment is not used,                                Reasons for not offering automatic
Unsurprisingly, most plans with auto enrollment            will it be in 2020?                                                 enrollment*
use it for new hires (96.8%). However, nearly
20% had auto-enrolled existing employees either                                                  Very unlikely                        Unnecessary—participation is
                                                                                                                                                                                        40.9%
                                                                                                                                                        adequate
through a one-time or periodic sweep.
                                                                                                 Somewhat unlikely                                       Too costly         22.7%

Key reasons for not implementing automatic                                                       Somewhat likely                                 Not a high priority        22.7%
enrollment included: not being perceived as                            66.7%                                                                Lack of buy-in by upper
                                                                                                 Very likely                                                             18.2%
necessary, the potential cost impact, or not being                                                                                                    management
a high priority.                                                                                                                                              Other      18.2%

                                                                                                                               Too administratively challenging                 13.6%

                                                                                                                                                Fiduciary concerns            9.1%
                                                                       11.1%
                                                                                                                                        Employees would not like it        4.5%
                                                                       16.7%
                                                                                                                                                  Non-ERISA plan           4.5%
                                                                       5.6%
                                                                                                                                                        Don't know         4.5%
                                                           *Multiple responses were allowed.

                                                                                                                                                                                               14
Automatic Contribution Escalation

Plans with automatic enrollment were more likely   Plans offering automatic
to offer automatic contribution escalation—while   contribution escalation                                Approach for automatic escalation
76.2% of all DC plans offered automatic                                                                             Don't know        Both      Opt out       Opt in
escalation, that figure was 81.9% for plans that   100%                                                   100%
                                                                                                                                                             3.0%
also had automatic enrollment, compared to                                                       76.2%                                                                   Total
                                                    80%                        70.1%                       80%                                              36.4%
60.1% of plans without automatic enrollment.                                                                                                                             Opt
                                                                                       75.9%                                                                             Out
                                                    60%              71.7%                                 60%                                                           62.2%
After rising sharply from 2015 to 2016, the
                                                    40%                                                                                                      25.8%
prevalence of automatic contribution escalation             50.5%                                          40%

has remained at about 7 in 10 for the past four     20%                                                    20%                                               34.8%
years.
                                                      0%                                                    0%
                                                             2015     2016     2017     2018       2019       2015          2016         2017        2018         2019
The percentage of plans with automatic
contribution escalation that use an opt-out
approach came in at 62.2% in 2019, returning to    If automatic escalation is not
similar levels as previous years (2016: 59.5%,     used, will it be in 2020?                              Reasons for not offering automatic escalation*
2015: 60.7%, and 2014: 52.8%), after increasing
markedly in 2017 (70.8%).                                                          Don't know                    Employees would not like it                           27.8%
                                                            11.8%
                                                                                   Very unlikely
                                                            17.6%                                                         Not a high priority                 22.2%
A notable 47.0% of plans without automatic
                                                                                   Somewhat unlikely
contribution escalation are somewhat or very                                                                                           Other                  22.2%
likely to adopt this feature in 2020. The top                                      Somewhat likely
                                                           23.5%
reasons for not offering automatic contribution                                                             Lack of buy-in by management                  16.7%
                                                                                   Very likely
escalation were that employees would not like it                                                                                   Too costly        5.6%
or it was not a high priority.                              29.4%
                                                                                                                         Fiduciary concerns          5.6%

                                                            17.6%                                                              Unnecessary           5.6%

                                                   *Multiple responses were allowed.                       Too administratively challenging          5.6%

                                                                                                                                                                               15
Automatic Features: Rates and Caps

In 2019, default contribution rates for automatic           Default contribution rate over time                   Reasons for selecting the default rate*
enrollment ranged from 1% to 8%, with the
                                                    5.00%                                                            Allow participants to receive full
average holding steady at 4.4% and median                                                                                                                                            42.9%
                                                                                                                                      company match
staying at a 4.0% rate. Consistent with the prior                        4.6%       4.5%         4.4%    4.6%          Likely to be most palatable to
                                                              4.2%                                                                                                                  39.7%
two years, the most common reasons behind the                                                                               participants/limit opt outs
                                                                                                                                      Prevalent within
selection of the default rate were allowing                                                                                         industry/plan type
                                                                                                                                                                   17.5%
participants to maximize the company match and
                                                                                                                               Adhere to safe harbor             14.3%
being most palatable to participants.
                                                                                                                                 Cost considerations             14.3%
Similar to prior years, plans with opt-out
                                                                                                                    Maximize likelihood participants
automatic contribution escalation most frequently                                                                                                                14.3%
                                                    0.00%
                                                                                                                            reach retirement goals
had an annual increase rate of 1% (93% report                 2016       2017       2018         2019   In 2020
                                                                                                                                           Don't know              4.8%
this level, with the remainder reporting a 2%
automatic escalation rate).                                                                                                                     Other              4.8%

The average cap on automatic contribution                   Escalation cap over time                              Reasons for selecting escalation cap*
escalation declined somewhat in 2019 to 23.3%        35%                                                                                                  0.0%                               35.0%

                                                                                                                      Likely to be most palatable to
from 28.2% in 2018. The median cap remained          30%
                                                                        32.5%                                               participants/limit opt outs
                                                                                                                                                                                     35.9%
steady at 10% in 2019. The most common                                                                               Maximize likelihood participants
                                                                                   28.2%                                                                                    25.0%
                                                              26.8%
                                                     25%

reason behind the selection of the cap was being                                                                              reach retirement goals
                                                                                                23.3%   23.5%                          Prevalent within
most palatable to participants. Maximizing the
                                                     20%

                                                                                                                                                                         20.3%
                                                                                                                                    industry/plan type
likelihood that participants will reach their        15%

                                                                                                                        Allow participants to receive
                                                                                                                                                                    17.2%
retirement goals came in second.                     10%                                                                          full company match

                                                      5%                                                                       Adhere to safe harbor              14.1%

                                                                                                                                           Don't know            10.9%
                                                      0%

                                                              2016       2017       2018        2019    In 2020
                                                                                                                                                 Other           7.8%

                                                            *Multiple responses were allowed.                           Recommended by third party                 4.7%

                                                                                                                                                                                            16
Roth Features

The prevalence of Roth accounts in DC plans         DC plans allowing Roth-designated accounts
increased notably over the past few years from
61.6% in 2015 to 87.1% in 2019.
                                                                                                                                           3.5% No, but
While only 7.1% of sponsors did not allow and                                                                                              considering in next 12
                                                       61.6%           67.6%                71.3%              84.6%       87.1%
are not considering Roth-designated accounts,                                                                                              months
3.5% are considering allowing them in the
coming year. The most common reason for
waiting to add a Roth feature or not offering one          2015            2016              2017              2018         2019

was due to the complexity of a participant
communication campaign to describe the
feature.                                            DC plans allowing in-plan Roth
                                                    conversions                                                        Type of in-plan Roth conversions offered
The percentage of plans allowing in-plan Roth
conversions continued to increase, now at              Don't know     No          No, but intend to offer   Yes
                                                                                  in the next 12 months
66.7%, with an additional 4.2% that intend to
                                                    100%
offer it in the next year.                                                                              4.2%
                                                                                                                                       Don't
                                                                                                                                       know     Pretax
                                                     80%                                              25.0%                            12.5%    18.8%
The most common type of in-plan Roth
conversions offered allow for the conversion of                                                         4.2%
both pretax and after tax monies, at 45.8% of        60%

respondents.                                                                                                                                        After tax
                                                     40%                                                                           Both             22.9%
                                                                                                      66.7%                        45.8%

                                                     20%

                                                     0%
                                                       2015         2016           2017        2018         2019

                                                                                                                                                                    17
Company Stock Prevalence

The share of sponsors that offer company stock        Plans offering company stock
either as an available investment option or as an
ESOP within the plan remained consistent with
prior years, except for 2017, which appears to be
an aberration.                                             39.3%         38.5%                  50.8%             36.6%                 37.8%

Most plans that do not offer company stock
indicated the plan has never done so (74.4%).              2015           2016                  2017              2018                  2019
However, approximately 20% of respondents
indicated that the plan once offered company
stock but has since eliminated it.
                                                                                                        Plan’s experience with company stock, if
                                                      Is company stock offered?                         not now offered

                                                                         No                                    Other/Don't know
                                                                                                               Offered in past, but have frozen
                                                                                                               Offered in past, since eliminated
                                                                         No, but a standalone
                                                                         ESOP is offered                       Never offered company stock
                                                                                                        100%
                                                             57.8%                                                                                         4.7%
                                                                         Yes, as an ESOP
                                                                                                                                                   20.9%
                                                                                                         80%
                                                                         Yes, as an available
                                                                         investment option               60%
                                                             4.4%
                                                             6.7%
                                                                                                         40%                                       74.4%
                                           37.8%
                                                Yes
                                                             31.1%                                       20%

                                                                                                         0%
                                                                                                           2015       2016       2017       2018      2019

                                                                                                                                                             18
Limiting Company Stock Liability

All plan sponsors with company stock took some          Actions to limit potential liability for company stock*
steps to limit their liability, with an average of
three actions being taken. The most common was                                                                          2018                2019
to communicate diversification principles (65.6%),                       Communicate to improve diversification                                                54.2%
down from a record high of 75.8% in 2017. About                                          out of company stock                                                           65.6%
53% of respondents indicated that company stock
                                                                                 Regularly review company stock                                    41.7%
was regularly reviewed in investment committee
                                                                               in investment committee meetings                                              53.1%
meetings and 43.8% indicated that company
stock was hardwired into the plan document.                               Hardwire company stock into the plan                                     41.7%
                                                                         document (e.g., require that it is offered
                                                                                       as an investment option)                                      43.8%
Offering tools to help improve diversification out of
                                                                             Offer tools to improve diversification                                    45.8%
company stock somewhat declined, with 4 in 10
                                                                                             out of company stock                                  40.6%
respondents taking this approach (40.6%).
                                                                                                                                 20.8%
                                                                          Outsource oversight of company stock
Outsourcing oversight of company stock to a                                                                                                    37.5%
third-party fiduciary nearly doubled in 2019 from
                                                                                                                                                   41.7%
the 20.8% of plan sponsors that reported                                     Cap contributions to company stock
                                                                                                                                 21.9%
engaging a third party in 2018.
                                                                                                                                 20.8%
                                                                     No insiders are on the oversight committee
Those capping company stock decreased to                                                                                         21.9%
21.9% after fluctuating from 18.2% in 2017 to
                                                                                                                         12.5%
41.7% in 2018.                                                                              Company stock is frozen
                                                                                                                               18.8%

                                                                     Provide clear guidelines for evaluation and                    25.0%
                                                                   monitoring in the investment policy statement             6.3%

                                                        Additional categories (2018/2019): Other (0.0%/6.3%); sunset the company stock and will remove it as an investment option
                                                        (0.0%/0.0%); nothing (0.0%/0.0%).

                                                        *Multiple responses were allowed.

                                                                                                                                                                                    19
Anticipated Changes to Company Stock

More than 4 in 5 respondents (85.7%) anticipate    Changes regarding company stock next year*
no changes to their company stock in the coming
year, which represents an increase over prior
years (81.8% in 2018, 66.7% in 2016, 72.7% in                      No changes anticipated                                                                               85.7%
2014).
                                                      Increase communication to improve
                                                                                                    14.3%
                                                      diversification out of company stock
Next year, 14.3% of plan sponsors will increase
communication around participant diversification
away from company stock.                              Cap contributions to company stock               7.1%

Similar to last year’s findings, no respondents    Outsource oversight of company stock                7.1%
indicated that they intend to eliminate company
stock in 2020, in contrast to 2.8% in 2016 and            Regularly review company stock
                                                                                                       7.1%
6.3% in 2017.                                           in investment committee meetings

                                                                Offer more tools to improve
                                                                                                    3.6%
                                                      diversification out of company stock

                                                                   Change language in the
                                                                                                    3.6%
                                                               investment policy statement

                                                                                       Other        3.6%

                                                   Additional categories with 0.0%: Eliminate insiders from investment committee; hardwire company stock into the plan document;
                                                   waiting to make decision pending the outcome of recent stock drop lawsuits; freeze company stock; eliminate company stock as a
                                                   plan option.

                                                   *Multiple responses were allowed.

                                                                                                                                                                                    20
Default Investments

Most DC plans had a qualified default investment        Is the default investment fund a QDIA?
alternative (QDIA) as the default investment fund
(98.1%).                                                                   Yes
                                                        100%

A key provision of the Pension Protection Act                     99.1%                         98.8%
                                                                                                         97.8%      98.1%
                                                         95%
(PPA) provides relief to DC fiduciaries that
default participant assets into QDIAs under
                                                         90%                     92.7%
regulation 404(c)(5). Plan sponsors complying
with this provision are responsible for the
prudent selection and monitoring of the plan’s           85%

QDIA, but are not liable for any loss incurred by
participants invested in the QDIA.                       80%
                                                                  2015            2016          2017     2018       2019

In 2019, 87.3% of plans used a target date fund as
their default for non-participant directed monies, in
line with recent years. Usage of other QDIA types       Current default investment alternative for non-participant directed monies
also stayed fairly static.                                                                                                      1.0%
                                                        100%                                                                    2.9%   Other
                                                                                                                                3.9%   Managed account
Before the PPA, target date fund usage as a                                                                                     3.9%
                                                         80%
QDIA was only 35.1% in 2006, with money                                                                                         1.0%   Target risk

market/stable value making up 30% and risk-                                                                                            Balanced fund
                                                         60%
based funds at 27.5%. The PPA paved the way                                                                                            Stable value or money market
for a major uptick in the adoption of target date                                                                       87.3%          Target date retirement
                                                         40%
funds as QDIAs.
                                                         20%

                                                         0%
                                                           2006     2007         2009    2011     2013   2015    2017      2019

                                                                                                                                                                      21
Target Date Fund Landscape

Nearly every DC plan offered target date funds       Approach used for target date funds
(93.3%). Continuing a long-observed trend,
                                                                                                              0.0%            1.1%
those offering their recordkeeper’s target date      100%                                                                                    Other
                                                                                                              2.0%            5.3%
option continued to drop—from more than 50%                                                                   17.3%           21.1%          Don't know
in 2012 to 21.4% in 2019. As with last year, there    75%
is more uncertainty over what approaches will be                                                              29.6%                          Custom target strategies
                                                                                                                              31.6%
used going forward, as evidenced by the 5.3%          50%
                                                                                                                                             Collective trust that isn’t recordkeeper’s
that do not know which target date fund (TDF)
                                                                                                              29.6%
approach they will use in 2020.                                                                                               25.3%          Mutual fund that isn’t recordkeeper’s
                                                      25%

                                                                                                              21.4%           15.8%          Mutual fund or collective trust of
The prevalence of custom target date solutions
                                                        0%                                                                                   recordkeeper
witnessed a modest increase (from 13.3% to                2015          2016        2017              2018     2019      Will use
17.3%) during the past year. Further, 21.1%                                                                              in 2020
expect to use a custom approach in the coming
year. Those offering custom solutions cited
                                                     Reason for custom TDF*                                                         Custom TDF fiduciary*
                                                                                             0.0%                                   92.0%
access to best-in-class underlying funds, better
                                                              Seek to have best-in-class
cost structure, and control over the glidepath as                                                                     72.2%                 Plan sponsor                60.8%
                                                                       underlying funds
the top motivations.                                                 Better cost structure                       66.7%
                                                                                                                                    Investment manager         37.3%
                                                           Prefer to control the glidepath                   51.5%
The majority (60.8%) of those using a custom
                                                      Ability to hire/terminate underlying                                                    Consultant 21.6%
solution reported that the plan sponsor acts as a                                                    33.3%
                                                                                managers
fiduciary. This is still down historically. For
                                                      Seek to leverage funds in DB plan             22.2%                                   Recordkeeper        9.8%
comparison the figure stood at 77% and 84%,
                                                              DOL's Tips for ERISA Plan
respectively in 2016 and 2015.                                                                        8.3%
                                                                              Fiduciaries
                                                                                                                                               Custodian      2.0%
                                                                                 Branding            5.6%

                                                                               Don't know            5.6%
93.3% of plans offer a target date
                                                                                     Other          2.8%
fund in their lineup
                                                     *Multiple responses were allowed.

                                                                                                                                                                                     22
Target Date Fund Landscape (continued)

Among those that offered TDFs, nearly 77%           Target date fund investment approach
used an implementation that was at least
partially indexed. The share of mixed (or           100%
                                                                                                                                                               Mix of index and active
blended) strategies increased year-over-year                                                                                  39.4%                            management
                                                                                                                                            76.6%
from 23.0% to 39.4%. This sharp increase came        75%                                                                                    at least           Indexed
largely at the expense of purely passive                                                                                                    partially
                                                                                                                                            indexed
implementations, which witnessed a decline from      50%                                                                                                       Actively managed
                                                                                                                               37.2%
51.4% to 37.2%.
                                                     25%
Over half (56.2%) of plan sponsors took some                                                                                   23.4%
sort of action with regard to their TDFs in 2019.      0%
Of those taking action, evaluating the glidepath         2011      2012      2013     2014     2015      2016     2017      2018     2019
suitability maintained its place as the most
prevalent course of action (80.5%). Changing the
share class of the TDF (19.5%) and replacing        TDF actions taken or planned*
the TDF (12.2%) rounded out the top three.
                                                          2019         In 2020

                                                         80.5%
                                                                   75.7%

56.2% took action
                                                                                 19.5%                          16.2%
43.8% took no action                                                                     10.8%        12.2%
                                                                                                                            7.3%
                                                                                                                                      10.8%
                                                                                                                                                   4.9%      0.0%        4.9%
                                                                                                                                                                                  0.0%
with respect to their target date fund                  Evaluate              Change share          Replace TDF            Shift to a mix        Move to a TDF         Eliminate TDF
                                                        suitability           class of TDF                                 of active and         collective trust
                                                        of glidepath                                                       passive TDFs

                                                    *Percentages out of those taking/expecting to take action with their target date fund. Multiple responses were allowed.

                                                                                                                                                                                         23
Target Date Fund Selection

While the order was different, priorities remained   Criteria for selecting or retaining target date funds
the same as previous years. The top three
reasons for selecting or retaining target date                                        2016                          2017                             2018                        2019                     Ranking
funds in 2019 were: portfolio construction, fees,                                     Performance                   Portfolio construction           Performance                 Portfolio construction       5.2
and performance.

                                                                                      Fees                          Fees                             Portfolio construction      Fees                         5.1

                                                                                      Portfolio construction        Performance                      Fees                        Performance                  4.8

                                                                                      Risk                          Risk                             Number, type, and           Ability to achieve pre-      2.8
                                                      Most important key attributes
                                                                                                                                                     quality of underlying       specified retirement goal
                                                                                                                                                     funds
                                                                                      Number, type, and             Ability to achieve pre-          Risk                        Risk                         2.8
                                                                                      quality of underlying         specified retirement goal
                                                                                      funds
                                                                                      Ability to achieve pre-       Number, type, and                Active vs. passive          Active vs. passive           2.3
                                                                                      specified retirement goal     quality of underlying
                                                                                                                    funds
                                                                                      Active vs. passive            Active vs. passive               Usage of tactical asset     Number, type, and            2.3
                                                                                                                                                     allocation                  quality of underlying
                                                                                                                                                                                 funds
                                                                                      Usage of tactical asset       Usage of tactical asset          Name recognition            Usage of tactical asset      1.3
                                                                                      allocation                    allocation                                                   allocation

                                                                                      Name recognition              Name recognition                 Whether the funds are       Name recognition             1.3
                                                                                                                                                     proprietary to the
                                                                                                                                                     recordkeeper
                                                                                      Whether the funds are         Whether the funds are            Ability to achieve pre-     Whether the funds are        0.6
                                                                                      proprietary to the            proprietary to the               specified retirement goal   proprietary to the
                                                                                      recordkeeper                  recordkeeper                                                 recordkeeper

                                                                                      (7=Most important. Total ranking is weighted average score.)

                                                                                                                                                                                                               24
Target Date Fund Benchmarking

Over three-quarters of plan sponsors (77%)            Target date fund benchmarks*
reported using multiple benchmarks to monitor
their target date funds. Surprisingly, 2.1% of              2017        2018        2019
respondents indicated they do not benchmark
their TDFs.
                                                                        65.3%
                                                                62.2%
Manager benchmarks continued to be the most            58.0%                                       56.8%
common means of measurement and have
shown increased acceptance over the past few
                                                                                                                     47.3% 48.4%
years. Industry benchmarks as well as peer
benchmarks also experienced increased                                                      37.8%
                                                                                                             39.3%
acceptance over time, indicating the possibility of                               34.8%
plan sponsors taking a more varied approach.
                                                                                                                                       24.1%
                                                                                                                                                18.9% 20.0%

                                                                                                                                                                            12.6%
                                                                                                                                                              8.9%
                                                                                                                                                                     6.8%

                                                       Investment manager        Industry benchmark         Peer benchmarking          Custom benchmark       Retirement income
                                                       benchmark                                                                                              adequacy analysis

                                                      Additional categories (2019 data): Do not benchmark (2.1%); don’t know (2.1%); other (2.1%).
                                                      *Multiple responses were allowed.

                                                                                                                                                                                  25
Investment Menu

The vast majority of DC plans had a mix of            Investment menu approach
active and passive investment funds (92%).
                                                      100%                                                                   2.0%
Purely active (3.0%) or passive (3.0%) remain a                                                                                     Don't know
                                                                                                                    3.0%     3.0%
rarity.                                                                                                            22.2%            All passive funds
                                                       75%

Most plan sponsors (76.9%) did not change the                                                                                       All active funds
proportion of active versus passive funds in their     50%
                                                                                                                                    Active/passive mirror
plan in 2019. For those making changes, far
                                                                                                                   69.7%
more increased the proportion of passive funds                                                                                      Mix of active and passive funds
                                                       25%
than active funds in 2019 (17.9%) and plan to do
so in 2020 (7.3%).
                                                       0%
                                                         2015            2016            2017              2018        2019
The use of a tiered investment structure climbed
yet again, reaching a high of 69.8%,
representing a marked increase from 48.3% in          Active/passive mix changes                                  Use of tiered investment structure
2016. Most described their tiered structure as
                                                             5.1%         2.4%                                        2.4%           2.1%
being comprised of some form of asset                                                  Increased proportion                                             Don't know
                                                                          7.3%         of active funds
allocation fund tier, core fund tier, and specialty
                                                         17.9%                                                       35.4%          28.1%               No
fund tier.                                                              90.2%          Increased proportion
                                                         76.9%                         of passive funds                                                 Yes
                                                                                       Mix of active and
                                                                                       passive remained                             69.8%
                                                                                       same                          62.2%

 Tiered investment structure: Allows plan
 sponsors to build fund lineups for a
 heterogeneous participant base that includes “do-
 it-for-me” (tier 1), “do-it-myself” (tier 2), and
 “investment savvy” participants (tier 3).               2019       Expected in 2020                                  2018           2019

                                                                                                                                                                      26
Investment Menu (continued)

The majority of plan sponsors did not change the    Changes to the number of funds
number of funds in their DC plan in 2019. When
                                                                  # of funds remained the same                      Decreased # of funds                 Increased # of funds
changes did occur, more plans decreased the
number of funds, which is consistent with the                                                         15.2%                 Expected                                             13.7%
                                                         2019                                 71.2%                                                                 80.4%
stated intentions in last year’s survey.                                                                         13.6%       in 2020                                                 5.9%

U.S. small/mid cap equity and global ex-U.S.
equity were the most commonly added funds in        Types of funds added or eliminated
2019 while emerging market funds were the                                            Added/will add                                        Eliminated/will eliminate
most commonly removed. For 2020, 5.3% plan                                      In 2019             In 2020                              In 2019               In 2020
on adding a target date fund, which is likely                   Alternatives                                       1.8%
referring to the addition of a new vintage (e.g.,       Brokerage window                                           1.8%
                                                                Commodity                                                                      3.5%
2065 fund).
                                                         U.S. fixed income              7.0%
                                                      U.S. large cap equity         1.8%                           1.8%                         3.5%
                                                      U.S. smid cap equity                8.8%                     1.8%                       1.8%
                                                      U.S./global balanced                                                                    1.8%
                                                      Emerging mkt equity            3.5%                                                         5.3%
                                                            High yield fixed                                                                                              1.8%
                                                      Global ex-U.S. equity               8.8%                                                1.8%
                                                       Global ex-U.S. fixed                                        1.8%                         3.5%                      1.8%

53.1% of plans mapped assets in                              Money market
                                                                      REITs         1.8%
                                                                                                                                              1.8%
                                                                                                                                              1.8%
eliminated funds to similar funds                                     ESG*             5.3%                         3.5%
31.3% mapped to the default fund                           Specialty/sector                                                                   1.8%
                                                               Stable value         1.8%
15.6% mapped to both                                            Target date          3.5%                            5.3%                     1.8%
                                                                       TIPS                                                                   1.8%
                                                                      Other           5.6%                          3.5%                      1.8%

                                                                               0%                     22%   0%                     22%   0%                   22%    0%                     23%

                                                    *Environmental, social, and governance.

                                                                                                                                                                                       27
Investment Vehicles

Use of mutual funds and collective trusts continues   Investment types within the fund lineup*
to be the most prevalent, at 86.2% and 70.2%,
respectively. More often, plans used collective                                                   2018               2019
trusts for non-stable value options rather than the                                                                                                         82.8%
stable value option. The use of separate accounts                              Mutual funds
                                                                                                                                                               86.2%
in 2019 remained similar to the levels seen in
2018, at 35.1%.                                                                                                                                       75.0%
                                                                            Collective trusts
                                                                                                                                                  70.2%
The proportion of plans using unitized funds also
remained similar from 2018 to 2019. Of those                                                                                   48.4%
using unitized funds, 90.5% had over $1 billion in                                Brokerage
                                                                                                                                 50.0%
plan assets.
                                                                                                                      37.5%
Use of a brokerage window rose slightly in 2019,                         Separate accounts
                                                                                                                    35.1%
to 50.0%. Of those offering a brokerage window,
74% offer a full window while 26% offer only                                                               23.4%
mutual funds.                                               Unitized or private label funds
                                                                                                           22.3%

                                                                                                    3.1%
                                                                                   Annuities
                                                                                                    4.3%

                                                               Pooled insurance company            3.1%
                                                                        separate account
                                                                                                   3.2%

                                                      *Multiple responses were allowed. Some respondents offer multiple asset classes in each vehicle type (e.g., both stable value and
                                                      another asset class are offered as a collective trust and/or separate account).

                                                                                                                                                                                          28
Investment Structure Evaluation

As in recent years, the majority of plan sponsors   Timing of investment structure evaluation
(52.0%) conducted an investment structure
evaluation within the past year.                                                             1.2%                          3.0%
                                                                 5.7%                        5.8%                          2.0%                Never
                                                                 4.1%
                                                                 4.1%                        5.8%                         11.0%
Regular due diligence remained the most                                                                                                        Don’t know or don’t recall
                                                               27.9%                        32.6%
common reason for conducting an investment                                                                                32.0%                More than 5 years ago
structure evaluation. The next most common
                                                               58.2%                                                                           3-5 years ago
reasons were to identify gaps and overlaps in the                                           54.7%                         52.0%
fund lineup (39.4%), streamline the fund lineup                                                                                                1-3 years ago
(22.3%), and to add additional diversification
                                                                                                                                               Within last year
opportunities (22.3%).

                                                                2017                         2018                          2019

                                                    Reasons for most recent investment structure evaluation*
                                                          2018          2019

                                                     76.6% 76.6%

                                                                        44.2% 39.4%

                                                                                                                     22.3%     10.4%
                                                                                                  22.3%                                 6.4%   3.9%     5.3%       6.5%     5.3%
                                                                                          15.6%             18.2%

                                                    Regular due         Identify gaps   Streamline the      Add additional    New consultant Participant          Switching to
                                                    diligence           and overlaps in fund lineup         diversification                  demand               different vehicle
                                                                        the fund lineup                     opportunities                                         structures^

                                                    Additional categories (2018/2019 data): New recordkeeper (2.6%/3.2%); other (7.8%/2.1%).
                                                    ^e.g., unitization, separate accounts, collective trusts

                                                    *Multiple responses were allowed.

                                                                                                                                                                                   29
Investment Criteria

As in 2018, investment performance stood as the     Fund evaluation and selection criteria
top-ranking criteria for evaluating and selecting
investment funds. Likewise cost and fees                                                                                              Ranking

remained the second most-important criteria.                            Investment performance                                            3.9

                                                     Most important
Participant request continues to be a low-ranking                       Cost and fees                                                     3.4
attribute in the evaluation and selection of
investment funds.                                                       Fills style or strategy gap                                       2.7

                                                                        Investment management team stability                              2.1

                                                                        Style consistency                                                 1.2

                                                                        Quality of service to plan sponsor                                0.5

                                                                        Ease of integration with recordkeeping system                     0.4

                                                                        Brand name/market image                                           0.3

                                                                        Participant communication and educational support                 0.2
                                                     Least Important

                                                                        Leverages existing pension fund managers                          0.2

                                                                        Participant request                                               0.1

                                                                       (5=Most important. Total ranking is weighted average score.)

                                                                                                                                                30
Fund Replacement

In 2019, more than one-third of plan sponsors         Plans replacing funds due to performance-related reasons
reported replacing funds in the past year
because of performance-related reasons. This          100%                                                                                            3.5%         Don't know
was a notable increase from the 25% that
replaced a fund in 2018.                                                                                                                                           No
                                                       75%
                                                                                                                                            60.5%
                                                                                                                                                                   Yes
Global/global ex-U.S. equity was the most
commonly replaced fund type, which could               50%
partially be a result of plan sponsors’ decision to
switch from developed to more broad non-U.S.           25%
mandates (e.g., MSCI ACWI ex-USA). Contrary                                                                                                 36.0%
to last year, large cap equity was replaced
                                                         0%
relatively often, whereas small cap equity was             2015                    2016                     2017                   2018             2019
not.
                                                      Funds replaced*
Of the fund changes made, 19.0% were for mid                               -9.0%          1.0%          11.0%           21.0%       31.0%   41.0%          51.0%

cap equity, a notable increase from 2018 (9.8%).      Global/global ex-U.S. equity                                              33.3%

                                                                  Large cap equity                                         28.6%

                                                                    Mid cap equity                              19.0%

                                                                     Fixed income                9.5%

                                                                  Small cap equity               9.5%

                                                                                   ESG             4.8%

                                                                        Real estate                4.8%

                                                      *Percentages are out of just those that made changes. Multiple responses were allowed.

                                                                                                                                                                                31
Re-enrollment

In 2019, 17.8% of plan sponsors indicated they         Have you conducted an asset re-
had ever conducted an asset re-enrollment—             enrollment?                                            Reasons for not conducting re-enrollment
defined as requiring all participants in the plan to             Don't know                                                                                                       Ranking
make a new fund selection or else be defaulted                   No, and not planning to
                                                                 No, but plan to in next 12 months                                Not necessary                                        5.4
into the default investment option. This                         Yes                               0.0%

                                                                                                               Most important
                                                       100%
represented a considerable increase from 2018,
                                                                                                                                  Participants would object to re-enrollment           5.1
when 9.1% of sponsors said they had conducted           75%
a re-enrollment.
                                                                                                    78.9%
                                                        50%                                                                       Not a priority                                       4.8
Of the plans that had engaged in a re-
enrollment, 68.8% did so more than 12 months            25%                                          3.3%                         Too much potential fiduciary liability               3.2
ago, versus 31.2% that either engaged in a re-                                                      17.8%
                                                          0%
enrollment within the past 12 months or have                2015        2016       2017      2018      2019                       Too many administrative complexities                 2.8
had multiple re-enrollments.
                                                                                                                                  Too difficult to communicate                         2.7
“Changes to the fund lineup” was the most              Re-enrollment reasons*
common motivation for re-enrollment (60.0%),
                                                                                                                                  Objections from senior management                    2.3
followed by poor existing investment elections by                Changes to
                                                                                                      60.0%
                                                                 fund lineup
participants (25.0%).
                                                              Poor existing                                                       Too costly                                           1.7
                                                       investment elections          25.0%
Most plans are not planning a re-enrollment—                 by participants
primarily because plan sponsors believe that it is                                                                                Already re-enrolled participants                     0.8

                                                                                                               Least Important
                                                       Plan merger or other
                                                                                  20.0%
not necessary, that participants would object, or         significant events
that it is not a priority.                                                                                                        Other                                                0.6
                                                                        Other   15.0%

                                                                                                                                  Too many employers to coordinate with                0.5
                                                          New recordkeeper          5.0%                                          to be feasible

                                                                                                                                 (7=Most important. Total ranking is weighted average score.)
                                                       *Multiple responses were allowed.

                                                                                                                                                                                          32
Investment Advisory Services: Prevalence

Up notably in recent years, the vast majority of      Plans offering guidance/advisory
DC plan sponsors (95.4%) offered some form of         services                                                    Type of guidance or advice offered*
investment guidance or advisory service to
                                                                                                                                                    2017       2018      2019
participants. In many cases, sponsors provided a
                                                                                                                                 Online advice                        64.8%
combination of different advisory services, with
                                                                          95.4%                                       (e.g., Financial Engines,                          74.1%
3.4 provided on average. This is up from two on                                                                                   Morningstar)
                                                                                                                                                                       65.8%
average last year.
                                                                           2019                                                                                 53.4%
Online advice was the most commonly offered                                                                                   On-site seminars                              75.9%
service (65.8%). On-site seminars were the next                                                                                                                       64.6%
                                                                          84.4%
most common (64.6%), followed closely by
                                                                                                                                                                52.3%
guidance (62.0%). While financial wellness
                                                                                                                                      Guidance                                  88.9%
services were among the least commonly                                     2018
                                                                                                                                                                      62.0%
offered, it was the only service that saw an uptick
from last year (29.6% in 2018 vs. 36.7% in                                                                                  Managed accounts                    52.3%
                                                                          75.2%                                       (e.g., Financial Engines,
2019).                                                                                                                                                              59.3%
                                                                                                                                  Morningstar)
                                                                                                                                                                51.9%
                                                                           2017                                                                             42.0%
                                                                                                                         One-on-one advisory
                                                                                                                                                                51.9%
                                                                                                                                    services
                                                                          83.6%                                                                              46.8%

                                                                                                                                                   17.0%
                                                                                                                   Financial wellness services
                                                                           2016                                                                       29.6%
                                                                                                                            (e.g., HelloWallet)
                                                                                                                                                           36.7%

                                                                                                                                                      9.1%
                                                                          88.3%                                          Full financial planning
                                                                                                                                                     25.9%
                                                                                                                              (e.g., Ayco, E&Y)
                                                                                                                                                       11.4%
                                                                           2015

                                                      *Percentages out of those offering advisory services. Multiple responses were allowed.

                                                                                                                                                                                    33
Investment Advisory Services: Enrollment and Payment

It remained most common for participants to pay          Who pays for investment advisory services?
for advisory services, either explicitly or as part of
the overall recordkeeping costs.                                                  Other Don't know
                                                                  Plan sponsor    1.3% 1.3%
                                                                  10.5%
The percentage of plan sponsors that paid the full         Shared by
                                                           participant and
expense of investment advisory services came in            plan sponsor
at 10.5% in 2019, a level similar to that of 2017          7.9%
(13.3%).                                                                                    Participant
                                                                                                              86.9%
                                                                                            47.4%             At least partially paid
For plan sponsors that offered managed                                                                        by participant
accounts, the vast majority (97.5%) offered them
                                                            Included in
as an opt-in feature whereby participants must              recordkeeping fee
elect to use the feature. This is significantly up          31.6%

from 2016 (78.2%).
                                                         How are participants enrolled in managed accounts?
By comparison, few plans enrolled participants
on an opt-out basis (2.5%). Plan sponsors cited                                    Opt out                                 Don't know
the associated fees as the top reason for not                                      2.5%                          Opt out   5.4%
offering opt-out enrollment.                                                                                     5.4%

                                                                                 Opt in                                        Opt in
                                                                                 97.5%                                         89.2%

                                                                                          2019                                  2018

                                                                                                                                        34
Investment Advisory Services: Satisfaction

Satisfaction with investment advisory services      Types of advisory services expected                            Satisfaction ratings of guidance
was generally high. On-site seminars received       to be added in 2020*                                           or advisory service
the highest marks, with 100% of respondents                                                                                                    0.0%                         100.0%
                                                        Financial wellness                      50.0%                                        Very satisfied     Somewhat satisfied
very or somewhat satisfied. Guidance and one-
on-one advisory services also ranked highly, at     Full financial planning                     50.0%
                                                                                                                            On-site seminars            58.7%        41.3%
98.0% and 97.2%, respectively.
                                                             Online advice          28.6%

While the majority of plan sponsors were               Managed accounts          21.4%
satisfied with their full financial planning         One-on-one advisory                                                             Guidance          50.0%        48.0%
                                                                                 21.4%
services, 25% expressed some level of                           services
dissatisfaction.                                          On-site seminars       21.4%

                                                                  Guidance       21.4%                                   One-on-one advisory
In the coming year, for sponsors that plan to add                                                                                                      52.8%        44.4%
                                                                                                                                    services
advisory services, financial wellness (50.0%)
and full financial planning (50.0%) are the most    Reasons for eliminating/not offering                                    Managed accounts
likely to be added.                                 advisory services                                                 (e.g., Financial Engines,       41.7%        52.8%
                                                                                                                                  Morningstar)
                                                                                                      Ranking
Few plan sponsors are likely to eliminate
                                                     Low participant demand/potential                     4.3
investment advisory services—only one                                                                                            Online advice
                                                     utilization
respondent noted this expected action.                                                                                (e.g., Financial Engines,       40.0%       54.0%
                                                                                                                                  Morningstar)
                                                     Not a high priority                                  4.0
Low participant demand, being a lower priority,
and cost were the top three reasons plan             Too costly to participants                           3.6      Financial wellness services
                                                                                                                                                        46.7%      46.7%
sponsors will not offer advice.                                                                                             (e.g., HelloWallet)

                                                     Unsure how to do so in current                       3.5
                                                     regulatory environment
                                                                                                                        Full financial planning
                                                                                                                                                      41.7%     33.3%
                                                    (6=Most important. Total ranking is weighted average score.)             (e.g., Ayco, E&Y)
                                                    Additional categories: Dissatisfied with available products
                                                    (2.8); too costly to plan sponsor (1.5).
                                                    *Multiple responses were allowed.

                                                                                                                                                                                35
Post-Employment Assets

The percentage of plan sponsors that have a           Plans with a policy for retaining retiree/terminated assets
policy for retaining retiree/terminated participant
assets remained similar to 2017 and 2018
findings, still a notable increase from 43.5% in
2015. Among plan sponsors that had a policy,                    43.5%                   48.7%                  61.1%                      58.1%           62.7%
more seek to retain assets than not.

Many of the plans seeking to retain assets offer
                                                                 2015                    2016                   2017                      2018              2019
an institutional structure that is more cost
effective than what is available in the retail
market.

                                                      Types of retention policies*

                                                                 72.3%
                                                                                                61.7%

74.5% sought to                                                                                                                   27.7%
retain assets in 2019                                                                                                                                     21.3%

                                                        Seek to retain retiree         Seek to retain assets of       Do not seek to retain       Do not seek to retain
                                                        assets                         terminated participants        assets of terminated        retiree assets
                                                                                                                      participants

                                                      *Percentages out of those with a policy. Multiple responses were allowed.

                                                                                                                                                                          36
Plan Leakage

Most plan sponsors (88.6%) have taken steps to         Steps taken to prevent plan leakage*
prevent plan leakage. This included offering partial
distributions (67.1% in 2019 vs. 56.7% in 2018)                                                                           Took this step in the past     Will take this step in 2020
and installment payments (47.1% in 2019 vs.                                                                                                                                 67.1%
                                                                                                                                                                           67.1%
                                                                                            Offer partial distributions
44.8% in 2018). More than half allowed terminated                                                                                    13.0%
participants to continue paying off loans (55.7%).     Allow terminated/retired participants to continue paying off                                                55.7%
                                                                                                             loans               8.7%
In 2020, 65.3% anticipate taking additional steps                                                                                                          47.1%
                                                                                                   Offer installments
to prevent plan leakage—most notably, to make                                                                                        13.0%
the fund lineup more attractive to retirees,                                                                                                             44.3%
                                                                  Encourage rollovers in from other qualified plans
restructure loan plan provisions, encourage                                                                                                  21.7%
rollovers into the plan, or support the retention of                                                                                         32.9%
                                                                                  Restructure loan plan provisions^
assets.                                                                                                                                         26.1%
                                                                                                                                         28.6%
                                                                   Actively seek to retain terminated/retiree assets
                                                                                                                                            21.7%
                                                                                                                                    22.9%
                                                                                   Place restrictions on distributions
                                                                                                                                 8.7%
                                                                                                                                18.6%
                                                           Made fund lineup more attractive to terminated/retirees
                                                                                                                                                       30.4%
                                                                                                                                    11.4%
                                                                                                                 None
                                                                                                                                                       30.4%
                                                                                                                             2.9%
                                                                                                                Other
88.6% have taken steps to                                                                                                 0.0%
                                                                                                                          0.0%
prevent plan leakage                                                                                      Don't know
                                                                                                                             4.3%

                                                       ^e.g., reduce number of loans allowed, change loan frequency
                                                       *Multiple responses were allowed.

                                                                                                                                                                                       37
Retirement Income Solutions

Two-thirds of plans (66.2%) offered some sort of   Retirement income solutions offered*
retirement income solution to employees.
Providing access to a drawdown solution or to a                                           0.0%2017      10.0%    2018 20.0%      2019
                                                                                                                                   30.0%   40.0%      50.0%
managed account service were the two most                                                                                         33.0%
common.                                                                                None                                                        50.0%
                                                                                                                                   33.8%
The rate of plan sponsors that reported offering                                                                       24.1%
qualified longevity annuity contracts (QLACs) or        Drawdown solution or calculator              10.8%
longevity insurance in their plans remains low,                                                                                  32.5%
despite a 2014 Treasury Department ruling                     Managed accounts/income                               20.5%
making it easier to do so.                                  drawdown modeling services                          17.6%
                                                                (e.g., Financial Engines)                                24.7%

                                                                                                                                  33.0%
                                                                        Access to defined
                                                                                                               17.6%
                                                                             benefit plan
                                                                                                              16.9%

                                                                       In-plan guaranteed        8.9%
                                                                   income for life product        4.1%
                                                                (e.g., MetLife, Prudential)      9.1%

                                                                                                8.0%
                                                             Annuity placement services
                                                                                                  9.5%
                                                         (e.g., Hueler Income Solutions)
                                                                                                7.8%

                                                                                                      11.6%
                                                                     Annuity as a form of
66.2% offered a                                                      distribution payment
                                                                                              5.2%
                                                                                                     10.8%

retirement income solution                                                                    0.0%
                                                              Longevity insurance/QLAC         1.4%
                                                                                              0.0%

                                                   *Multiple responses were allowed.

                                                                                                                                                              38
Reasons for Not Offering Annuities

Plan sponsors cited a number of reasons to           If you will not offer an annuity-type product, please rate the reasons for not doing so
explain why they are unlikely to offer an annuity-
type product in the near term.                                                                                                Rating
                                                                            Uncomfortable/unclear about                       3.6
                                                                            fiduciary implications

                                                        Most important
Plan sponsors reported being uncomfortable or
unclear about the fiduciary implications, and that                          Unnecessary or not a priority                     3.4
an annuity-type product is unnecessary or not a
priority. Respondents also indicated that a lack                            No participant need or demand                     3.2
of participant need or demand, concern over
insurer risk, and concern over cost drove the                               Concerned about insurer risk                      3.0
decision to not offer these products.

                                                                            Too costly to plan                                2.3
                                                                            sponsors/participants

                                                                            Difficult to communicate to                       2.1
                                                                            participants

                                                                            Uncomfortable with available                      2.1
                                                                            products

                                                                            Too administratively complex                      2.0

                                                                            Availability of DB plan                           2.0

                                                                            Products are not portable                         1.8
                                                        Least Important

                                                                            Lack of product knowledge                         1.5

                                                                            Recordkeeper will not support this                1.1
                                                                            product
                                                                          (5=Most important. Total rating is weighted average score.)

                                                                                                                                          39
Fee Calculation

The percentage of plan sponsors that calculated     Last time all-in plan fees were calculated*
their all-in DC plan fees within the past 12
                                                    100%                                                                                   2.2%            Don’t know
months came in at nearly 70% in 2019. Another                                                                                              3.2%
                                                                                                                                           5.4%
19.4% have done so in the past one to two
                                                                                                                                   19.4%                   Never
years. Only 2.2% were unsure of the last time        75%
all-in fees were calculated, down from last year.                                                                                                          More than 3 years ago
                                                     50%
                                                                                                                                                           2-3 years ago
A combination of entities are generally                                                                                            69.9%
responsible for calculating plan fees. In 2019,      25%                                                                                                   1-2 years ago
fees were most frequently calculated by the
                                                                                                                                                           Within past year
consultant, followed by the plan sponsor and/or        0%
recordkeeper.                                            2015                2016                2017               2018               2019

                                                    Who handled your fee calculation?**

                                                           2018         2019

                                                                  64.4%
52.6% evaluated indirect revenue                      59.7%

when calculating fees
                                                                                         37.8%
                                                                             34.7%
21.8% did not know if it was                                                                        26.4%
                                                                                                              30.0%

                                                                                                                            6.9%      4.4%                               4.2%
evaluated                                                                                                                                         2.8%       1.1%               0.0%
                                                     Consultant/            Plan sponsor           Recordkeeper           Investment            Don't know              Other
                                                     Adviser                                                              manager

                                                    *All-in fees include all applicable administration, recordkeeping, trust/custody, and investment management fees.
                                                    **Multiple responses were allowed.

                                                                                                                                                                                       40
Fee Benchmarking

Nearly 9 in 10 plan sponsors (88.9%)                  In calculating fees, did you
benchmarked the level of plan fees as part of their   benchmark them?                                                Who handled the benchmarking?*
fee evaluation process, up from last year (83.3%).
                                                                                            Don't know
                                                      100%

The percentage of plan sponsors that did not know                      5.6%
                                                                       5.6%
whether plan fee levels were benchmarked (5.6%)                                             No                           83.5%
                                                      80%

was down slightly from 6.4% in 2018.
                                                                                            Yes
In the majority of cases, the consultant/adviser
                                                      60%

conducted the benchmarking (83.5%), which
                                                                       88.9%
was consistent with last year.                        40%

                                                                                                                                    22.4%
                                                                                                                                                         5.9%       3.5%
Plan sponsors tend to use multiple data sources in    20%                                                                                     12.9%                            1.2%
benchmarking. Consultant databases (60.8%)                                                                               Consult./ Plan      Record-   Invest. Other         Don't
were the most heavily used method. Data from the       0%                                                                Adviser sponsor     keeper    manager               know
recordkeeper (24.1%), general benchmarking data
(24.1%), and RFIs (21.5%) were the next most          How benchmarking was done*
frequently cited.
                                                                  2018           2019
                                                      70.0%

                                                      60.0%

                                                               67.7%
                                                      50.0%              60.8%
                                                      40.0%

                                                      30.0%

                                                                                                                            25.8%                                   9.7%      8.9%
                                                      20.0%

                                                                                    24.2%    24.1%       22.6%   24.1%               21.5%
                                                      10.0%

                                                                                                                                               16.1%     15.2%
                                                       0.0%

                                                              Consultant           Data from         General            Customized            Placing plan out     Customized
62.4% both calculated and                                     database             individual        benchmarking       survey of multiple    to bid (i.e., RFP)   survey of other
                                                                                   recordkeeper’s    data (e.g., CIEBA) recordkeepers                              plan sponsors
benchmarked plan fees within the                                                   database                             (i.e., RFI)
past 12 months
                                                      *Multiple responses were allowed.

                                                                                                                                                                                     41
Fee Calculation and Benchmarking Outcomes

Less than half of plan sponsors kept fees the        Outcome of fee analysis*
same following their most recent fee review
(44.2%), while nearly the same proportion                                                                              2018               2019
                                                                                                                0.0%                                                  50.0%

(41.9%) reduced fees.                                                                                                                                                54.7%
                                                                                  Kept fee levels the same
                                                                                                                                                             44.2%
After reducing fees, the next most common                                                                                                        29.3%
                                                                                         Reduced plan fees
activity resulting from a fee assessment in 2019                                                                                                          41.9%
was changing the way fees were paid (15.1%).                                                                                      14.7%
This remains down significantly from 2016—                               Changed the way fees are paid^
                                                                                                                                  15.1%
potentially reflecting the fact that many plan
                                                                  Rebated excess revenue sharing back                    8.0%
sponsors have already changed their fee                                                 to participants                5.8%
payment model.
                                                                                                                         1.3%
                                                                                                        Other
                                                                                                                       5.8%
In last year’s survey, plan sponsors rated fees as
                                                                                                                        1.3%
a lower priority communication topic. This                                               Increased services
                                                                                                                       4.7%
panned out as expected for the year with few
                                                                                                                       5.3%
plan sponsors (3.5%) having changed the way                                Initiated a recordkeeper search
                                                                                                                           3.5%
fees are communicated to participants as a
result of their fee review.                                    Changed the way fees are communicated                   0.0%
                                                                                         to participants                   3.5%

Of those selecting “Other,” one changed its                                                                            0.0%
                                                                                Initiated a manager search
                                                                                                                          2.3%
recordkeeper as a result of its fee assessment.
The majority of the others were still in progress
with their assessment and had not determined         Additional categories (2018/2019): Don’t know (2.7%/2.3%); implemented an ERISA-type account (0.0%/0.0%).

the outcome.

                                                     ^e.g., change from use of revenue sharing to an explicit participant fee
                                                     *Multiple responses were allowed.

                                                                                                                                                                              42
Fee Payment

Investment management fees were most often            How investment management fees are
entirely paid by participants (78.0%), and almost     paid                                                                  How administrative fees are paid
always at least partially paid by participants                   1.1%
(91.2%). In contrast, nearly half (45.7%) of all                 7.7%                                    Other/Don't know                                16.3%
administrative fees were paid entirely by                       13.2%
participants, up from last year, but still down
                                                                                                         100% paid by plan sponsor
significantly from 62.7% in 2017. Most plan                                                                                                              38.0%
sponsors (83.7%) noted that at least some                                         91.2%                                                                                  83.7%
                                                                                  at least               Partially paid by plan sponsor                                  at least
administrative fees were participant-paid.                                                               and plan participants
                                                                                  partially                                                                              partially
                                                                78.0%             paid by                                                                                paid by
In a modest decrease from last year, 27.3% of                                     participant            100% paid by plan participants                                  participant
                                                                                                                                                         45.7%
participants paid administrative fees either solely
through revenue sharing or through a
combination of revenue sharing and some type
of out-of-pocket fees. Only 11.7% paid solely
through revenue sharing (vs. 13.8% in 2018).          How participants pay for plan administration*
                                                                                          70.0%

Of those paying through an explicit fee, using a                                          60.0%

                                                                                                  2019    2018      64.9% 63.8%
per-participant fee continued to be more popular                                          50.0%

than an asset-based fee (64.9% vs. 22.1%).                                                40.0%

                                                          Revenue sharing                 30.0%

                                                          and some out of                         27.3% 29.3%
                                                                                15.6%
                                                                                          20.0%

                                                          pocket fee                                                                 22.1%
                                                                                                                                              19.2%
                                                                                          10.0%
                                                                                                                                                                         3.9%   3.4%
                                                          Revenue sharing        11.7%                                                                  0.0%     0.0%
                                                          only                            0.0%

                                                                                                  Revenue          Explicit per      Explicit asset-   Don't know       Other
                                                                                                  sharing          participant       based fee
                                                                                                                   dollar fee (e.g.,
                                                                                                                   $50 annual fee)

                                                      *Multiple responses were allowed.

                                                                                                                                                                                       43
You can also read