2020 Defined Contribution Trends Survey - Research - Callan
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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
1Key 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
2Key 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
3Respondent 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%).
5Plan 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.
6ERISA 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.
7Investment 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
8Fee 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.
9DC 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).
10Fiduciary 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).
11Areas 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
12Company 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.
13Automatic 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.
14Automatic 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%
15Automatic 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%
16Roth 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
17Company 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
18Limiting 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.
19Anticipated 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.
20Default 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
21Target 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.
22Target 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.
23Target 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.)
24Target 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.
25Investment 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
26Investment 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.
27Investment 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).
28Investment 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.
29Investment 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.)
30Fund 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.
31Re-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.
32Investment 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.
33Investment 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
34Investment 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.
35Post-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.
36Plan 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.
37Retirement 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.
38Reasons 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.)
39Fee 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.
40Fee 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.
41Fee 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.
42Fee 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.
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