Research

DATA & RESEARCH | PLANADVISER February 2013

2013 Micro Plan Survey

As small businesses are the main employer of Americans, so are micro plans—those holding less than $5 million in assets—the most common retirement plan size. 

By Alison Cooke Mintzer See Archive >
2013 Micro Plan Survey

As small businesses are the main employer of Americans, so are micro plans—those holding less than $5 million in assets—the most common retirement plan size. As of December 31, 2011, 92% of defined contribution plans were micro plans, up from 90% the year before, and the number of these grew by 72,079 for a total of 668,994 plans with 16.85 million participants enrolled.

Micro plans are not simply miniature versions of their larger peers, however. These small plans have yet to adopt many of the sophisticated plan design elements that larger plans have embraced. For instance, a mere 15.5% of micro plans^ automatically increase participants’ contributions, compared with 28.6% of all plans. For plans with less than
$1 million in assets, the average participation rate is 60.6%. This ticks up to a participation rate of 71.2% for plans in the $1 million to $5 million range and to 72.6% for all plans.

Likewise, a mere 15.5% of micro plans have a written investment policy statement (IPS) to guide the decisions of their investment committee; among all plans, a written IPS is used by 28.6%. Forty-four percent of micro plans review investment options only once a year, whereas 39.0% of all plans have these discussions quarterly. However, smaller plans are more likely to rely on the services of a financial adviser. More than two-thirds (68.1%) of micro plans use one, compared with 66.4% of plans in general. That is, of course, if the micro plan has an investment committee. Nearly two in five (39.9%) operate without one, compared with 22.3% of all plans. Micro plans are also more often a safe harbor plan design (53.0% of micro plans, compared with 49.4% of all plans). They offer lifecycle and target-date funds (TDFs) less frequently than other plans (66.5% versus 76.3%) but are more likely to offer an exchange-traded fund (ETF)—1.3% of micro plans, compared with 0.9% of all plans.

 

* The 2013 Micro Plan Survey represents an analysis of data collected in PLANSPONSOR magazine’s 2012 Recordkeeping Survey and its 2012 DC Survey; ^ Data reflects micro plans in the $1 million to $5 million bracket, unless specifically stated that the figures are for plans valued at less than $1 million.