A new plan sponsor survey finds that more than one in five (22%) plans are looking to switch advisors – though that’s well off last year’s pace.
Fidelity Investments’ ninth annual Plan Sponsor Attitudes study found that more plans than ever (92%) use plan advisors, and while the number of plan sponsors actively looking to switch their plan advisors this year (22%) is historically high, it’s down considerably from an all-time high of 38% last year. While In 2017, 37% of plan sponsors stated the No. 1 reason to hire an advisor was for fiduciary help, this year, the top reason they hired advisors was to help improve their plans (27%) compared with 7% in 2017. That said, reasons No. 2 and No. 3 remain unchanged: “Is the plan helping to retain top workers?” and “Are plan-related business costs being reduced?”
Despite that volatility, and the fact that more than 4 in 10 (44%) have been with their current advisor for four years or less, plan sponsors overall remain satisfied with their plan advisors (70%).
Top Concerns
The survey also found that the top concern of plan sponsors was whether the plan was effectively preparing employees for retirement financially (33%), a shift from a year ago, when the main focus was on reducing business costs related to the plan (32%).
About one in three plan sponsors reported that they added or changed a matching contribution (39% versus 25% in 2017), making that the top change to plan design this year. Just over half (56%) of plan sponsors made that change to increase employee participation, while 47% did so to increase savings rates.
The top changes to investment menus included:
33% - replacing an underperforming fund
28% - adding an index fund
25% - adding a lower-cost class of shares
Another emerging trend for plan sponsors was the decision to add a managed account program, with 23% of plan sponsors reporting that change.
Plan Designs
Auto-enrollment, which ranked as the top plan design change last year (42%), slipped to 26% this year. With only about half (51%) of plans using auto-enrollment, it is perhaps unsurprising that 6 in 10 finance and HR associates participating in the survey reported concern that employees would not respond well to being automatically enrolled. Moreover, 11% said that their advisor had not recommended automatic enrollment.
On the other hand, 87% of workers stayed in plans with an auto-enrollment default of 5% (or higher), and more than two-thirds (68%) reported being "very satisfied" with the feature. As other surveys have found, about a quarter (23%) of plans increased the auto-enrollment deferral rate and 29% added an automatic increase program.
Seven in 10 plan sponsors reported setting a goal for retirement income, though 37% of plan sponsors reported a goal of less than 40%.
Health Concerns
Two-thirds (65%) of plan sponsors stated that retirement plans compete for funding with health and other benefits, and sponsors considered health care to be the most important benefit for the company. More than half (54%) of plan sponsors reported reducing or deferring spending on other benefits due to higher health care costs. About one-third (32%) of plan sponsors using a health savings account (HSA) said its primary value to the company is to lower health insurance costs through high deductible plans.
The survey was conducted in collaboration with Harris Insights and Analytics, an independent market research company, which conducted an online survey of 1,124 plan sponsors on behalf of Fidelity during the month of February 2018.
