Research

DATA & RESEARCH | PLANADVISER February 2017

2017 PLANADVISER Micro Plan Survey

Small plans are big business.

By Alison Cooke Mintzer See Archive >
2017 PLANADVISER Micro Plan Survey
Art by Marcos Chin

Micro-sized defined contribution (DC) plans, as defined by the 2017 PLANADVISER Micro Plan Survey, are those with less than $5 million in assets. Taken as a whole, however, the micro-plan market in many ways is large. According to sister publication PLANSPONSOR’s 2016 Recordkeeping Survey, published last June, there are 746,796 micro defined contribution plans in the U.S., covering 16.2 million participants and having a total value of $548 billion.

Because there are larger fees to be earned from plans with greater assets, recordkeepers and even advisers may be tempted to gravitate—and often do—toward plans with more than $5 million. But the needs of micro plans can be quite vast, as are the opportunities for a good plan adviser in this corner of the market.

For one thing, the sponsor in charge of the plan usually wears many hats, and the DC plan is almost never among his top priorities on a day-to-day basis. An adviser can be a micro-plan sponsor’s greatest resource for plan design, investment strategy and participant education.

This year, just 59% of micro plans report using a retirement plan adviser, which is down from 66% last year and significantly below the 72% of plans with more than $5 million using plan advisers. Of the micro plans that do use advisers, 39% said that person acts in a fiduciary capacity. However, just as many—40%—said they are unaware of whether their adviser is a fiduciary to the plan or not. Less than 27% of micro plans last year were unsure of their advisers’ fiduciary role.

There are many aspects of micro-plan design reported in our annual survey on the following pages, and we encourage our readers to look through all of them. One of the most telling trends, despite the drop in adviser use among this year’s respondents, is the “Results” table at the bottom of page 44. Participation rates in micro plans rose from an average of 73% last year to 76% this year, and median plan participation also rose from 80% to 84%, respectively. In step with this, average account balances continued to grow, though not as dramatically, from $69,868 to $70,453.

Another good sign is that participants with outstanding loans and those making hardship withdrawals from their defined contribution accounts remained very low.

Methodology

back to top

The following tables summarize provider service ratings in the micro-plan market—i.e., plans with less than $5 million in defined contribution (DC) assets. Recordkeepers qualified for award consideration by receiving a minimum of 25 total client responses from sponsors of micro plans.

If a recordkeeper received at least that many responses but fewer than the minimum number of service ratings within a specific service category, it was ineligible for awards only in that service category. “Best in Class” awards are based on an aggregated net satisfaction score ­derived from ratings of 56 areas of service.

The three highest net satisfaction scores in each of 22 major service categories earned a Best in Class Award, as did those providers with a net satisfaction score above the asset group’s benchmark of 60%. A “Service Commendation” was given to recordkeepers that did not receive Best in Class honors but exhibited strong client satisfaction within a service attribute. Specifically, providers needed to have 90% of clients either “completely” or “mostly” satisfied with a particular service offering to receive a Service Commendation