Our 10th annual Defined Contribution Trends Survey reveals that fees are playing a heightened role in driving plan sponsor decision-making. Reviewing plan fees was cited as a key area of fiduciary focus, both now and for the foreseeable future.
Related to this focus on fees are trends including an increase in recordkeeper search activity, a movement to institutional fund structures, a de-emphasis on revenue sharing, and the adoption of fee policy statements.
We have published the Defined Contribution Trends Survey each year since 2007. This year 165 U.S. DC plan sponsors responded, with more than 80% having over $100 million in assets.
Other survey findings include:
Auto features: The use of automatic contribution escalation increased markedly over the past year (63% in 2016 versus 46% in 2015). Caps on automatic contribution escalation have also markedly increased (27% in 2016 from 19% in 2015).
Fund changes: Nearly half (47%) of plan sponsors reported making a fund change due to performance-related reasons. This is the highest in the survey’s history. Large cap equity was the most commonly replaced fund.
Target date funds: Plan sponsors that took action with their target date fund in 2016 most commonly cited evaluating target date suitability (67%) as the most prevalent course of action.
Money market funds: Largely in response to money market reforms going into effect, 64% of respondents have changed to a different money market fund or eliminated their money market fund altogether.
Fiduciary Rule: Respondents believe the Department of Labor’s 2016 Definition of a Fiduciary Rule will primarily impact the plan’s printed materials, website, and other educational materials (43%) and communication regarding plan rollovers (43%). (The survey was conducted before the Trump administration took office.)
Along with the data in our quarterly Callan DC Index™ and Target Date Index™, this survey paints a detailed picture of the challenges and opportunities that are top of mind for DC plan sponsors this year.
