What’s on the minds of larger defined contribution (DC) plan sponsors? According to a recently released Callan study conducted in late 2016 with almost 150 employers, fees, investments and compliance top the list. With more resources devoted to running this DC plan, what happens in the larger market usually trickles down market.
Though the number one action taken to reduce fiduciary liability was updating or reviewing their IPS (investment policy statement) followed by reviewing fees, the number one priority in 2016 will be compliance.
Other key findings from the Callan DC study include:
- 61% use auto-enrollment with 1 in 5 employing re-enrollment for current employees
- 88% of plans offer financial advice to employees
- 75% benchmark their fees as part of fee calculation and 53% rebate revenue sharing
- 86% use TDFs (target date funds) as their default option of QDIA – usage of the proprietary funds of the record keeper as their QDIA is down to 32% from 70% in 2011
- 15% of plans increased the number of funds while 11% decreased the number
The DOL’s 2012 fee disclosure regs and the 2006 Pension Protection Act (PPA) were cited as the most important events affecting DC plans showing that fees and auto features paved by the PPA are keys drivers for lawmakers and plan sponsors.
Though there is a lot of noise about the pending DOL conflict of interest rule aimed at increasing oversight of DC plans as well as IRAs, most affected will be advisors, especially those selling proprietary products, and broker dealers that will have to impose greater scrutiny over their advisors that manage DC plans and IRAs. The DOL rule could limit plan participants access to advisors and advice as well as education especially when they separate from employment but will have little impact on employers running their plan.
