The 10th annual Callan survey with large and mega 401k plan sponsors conducted in the fall of 2016 is a treasure trove of information about how these plans are changing as well as how companies view their retirement plan. Most of the lessons in this 401k survey are valuable for smaller plans and their advisors as many innovations, not all, come from larger 401k plans.
Here are some key finding:
- Auto Enrollment – 63% of plans use it up 27% from 2015; 51% of plans not using it are very likely to.
- Auto-escalation – 77% of plans using auto enrollment use auto escalation. Caps are growing.
- Target Date Funds –
- 93% of plans offer one
- 88% use it as their default option
- 63% are indexed or partially indexed
- The most common action was to review the suitability of the TDF for the employee base – not all TDFs are created equally
- Investment Changes
- 47% made some investment changes in 2016 which is the highest ever in the 10 year history of the survey
- Most common change was to replace large cap funds
- There’s a move from mutual funds to CITs (collective trusts)
- 65% offer a CIT in 2016 up from 48% in 2012
- 84% offer a mutual fund down from 92% in 2012
Other interesting finding:
- The most common way for plan sponsors to limit fiduciary liability is to review their fees
- The DOL rule’s impact is expected to be on IRA rollovers and educational materials
- 26% of plans expect to conduct a record keeper search
It’s a safe assumption that the use of the Ideal Plan with auto features is considered a best practice and will continue to grow led by auto-enrollment followed by auto-escalation with the stretch match likely to be next. The use of traditional single investment mutual funds is waning led by indexed TDFs and CITs. Pretty simple and clear messages worth following.
