2017 PLANADVISER Micro Plan Survey

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.