Finding the Exit

Spectrem Group says that, for the first time since it began tracking data in 1989, fees rank as the number one reason defined contribution (DC) plan sponsors switch providers.

A new report from Spectrem Group, “DC Market Needs,” says nearly one-third (30%) of plan sponsors cited cost/fees as the primary factor precipitating a change in plan providers, surpassing poor service (26%) and investment issues (12%). In 2005, cost/fees finished third (18%) behind poor service (45%) and investment issues (26%), Spectrem Group says.

Eighteen percent of plan sponsors said they pay less than 1% of plan assets in fees, and 21% cited fees in excess of 2% of assets. According to Spectrem, these responses are far more realistic than plan sponsors provided in 2005, when 54% said they paid less than 1% of assets and just 4% cited more than 2% of assets.

The Spectrem report is based on the online polling, conducted in May and June, of individuals responsible for the selection and evaluation of retirement plan providers at 1,052 companies with DC plans.