Small Plans Going it Alone

Smaller plans are frequently resource- and expertise-constrained when it comes to their workplace retirement plans, but a new survey indicates that they are less likely to do the things they should be doing — and less likely to get help from advisors to do them.

The survey, conducted among over 400 non-profit organizations that sponsor 403(b) retirement plans, found that only 60% reviewing and evaluating the investment options in their plans. However, according to the latest 403(b) Snapshot Survey from the Plan Sponsor Council of America (PSCA) and sponsored by the Principal Financial Group, just 40% of sponsors of small plans (1-49 participants) are doing so.

Moreover, under one in five (18%) of those small plans are receiving assistance from consultants in that review, compared with 64% of large plans. Additionally, while nearly 9% of plans say that no one is reviewing those funds, that total jumps to 16% among small plans (overall, more than 30% of respondents state their plan service provider reviews their mutual funds).

And while more than 4 out of 10 (42%) do not conduct a request for proposal (RFP) to help ensure their plan fees are reasonable, among the smallest plans, the percentage increases to 64%. They are also less likely to have replaced funds on their investment menus; while more than 40% of plans have not replaced any funds in the last two years, that was the case at two-thirds of small organizations. More than one in five (21.9%) small plan sponsors don’t use any particular focus in benchmarking their funds’ performance.

Not surprisingly, nearly a third (32.7%) of small plan sponsors said that “no one” monitors their investment policy statement (IPS) for compliance, compared with 7.2% among the largest plans.

Other Findings

A majority of plans (86%) indicate they benchmark their funds. The most popular elements used in benchmarking include:

  • performance (84%);
  • fees (69%); and
  • risk (64%).

More than half of sponsors indicate their plan provider helps participants make investment decisions, and 30% use an investment consultant to do so.

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