Small but Mighty
Traditionally, micro plans have been assumed to be the laggards of the retirement plan market—as many in the industry often are waiting for them to “catch up” to their larger peers in terms of the type and number of plan features and participant involvement. However, respondents to this year’s PLANSPONSOR Defined Contribution Survey sponsoring plans with assets of less than $1 million (micro A) and those with assets of $1 million to $5 million (micro B) show that, while there might be some slight statistical differences, micro plans do appear to be catching up to their larger peers in many areas.
In general, micro plan respondents align with industry trends about eligibility for enrollment, with more than six months being most common (about half) and within three months coming in second (about one-quarter), as well as median participation rate (75.0%).
Micro A and B plans are somewhat less likely to offer a matching contribution than are defined contribution plans overall (68.8%, 72.6%, and 76.6% respectively) —but, when they do, they are offering similar matches and vesting periods. However, micro B plans are slightly more likely to be less generous, with 35.3% of plans offering a less than 50% of 6% match, compared to 32.9% of all plans and 28.9% of micro A plans.
On the more generous side, 32.2% of micro A plans allow participants to be 100% vested in the match immediately upon enrollment, more, and more rapidly than, the overall rate (26.3%). Ironically, micro A plans were both most likely to say they had nearly all participants maximizing the match (33.5%), and the most likely plan segment to say that less than half their participants did so(25.4%).
Only 17.9% of micro A plans and 21.1% of micro B plans use automatic enrollment, well short of the 29.4% pace across all plans. Moreover, while larger programs continue to embrace the feature (albeit at a slower pace than the heady times of 2007/08), programs at the smaller end of the size scale have basically locked in at the same adoption rate. Additionally, while about one-tenth of plans across the size spectrum have put an auto-deferral increase program in place, only about 3.5% of micro A programs, and just 5.0% of micro B plans are using the feature.
What other areas could use some improvement? A whopping 79.0% of micro A plans don’t have an investment committee for their plan (which could be a function of “committee”—maybe it is only one person in charge of all decisions) and only 24.5% have a written investment policy statement. Compare that with micro B plans, where more than half (51.5%) have an investment committee (better than the all plans average of 40.9%) and 41.2% have an IPS.
With only 57.6% of micro A plans and 63.6% of micro B plans using a financial adviser, this leaves ample opportunity for skilled retirement plan advisers to help those lagging plans in the areas where they most need help to stay out of trouble. —PA
* Data for all plans and size segments, including best in class for all categories, can be found in the November 2010 issue of PLANSPONSOR or online at www.plansponsor.com.
METHODOLOGY: Between late June and late August 2010, approximately 35,000 survey questionnaires were sent to defined contribution (DC) plan sponsors from the PLANSPONSOR magazine database, as well as to client lists supplied by DC providers; 5,635 total usable responses were received by the close of the survey on September 1, 2010. Full survey results are available in the November 2010 issue of PLANSPONSOR and on plansponsor.com. Of these responses, 3,131 were from “micro” plans (<$5 million in DC plan assets). The micro plans were divided into two subcategories: <$1 million in plan assets (1,214 responses); and $1 million – $5 million in plan assets (1,917 responses). In order to qualify for rating in the survey, providers needed a minimum of 35 total client responses. In order to be rated in a particular asset category, a provider needed at least 15 client responses in either of the two micro asset categories. Best in Class awards were given to the top quartile provider scores for each question by asset category.
In addition to the data published here, customized research reports are available by provider, by market segment, and by industry. For more information, contact Brian O’Keefe (bokeefe@assetinternational.com).
Top 10 Providers—Micro Plans (<$5 million in DC plan assets)
Total number of responses | |||
1 | OneAmerica (AUL) | 508 |
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2 | ADP Retirement Services | 308 |
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3 | CPI Qualified Plan Consultants, Inc. | 284 |
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4 | Ascensus | 273 |
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5 | ExpertPlan, Inc. | 189 |
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6 | The Hartford | 141 |
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7 | Great-West Retirement Services | 112 |
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8 | BB&T | 87 |
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9 | CUNA Mutual Group | 73 |
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10 | ING | 61 |
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Percentage of clients using a financial adviser | |||
1 | Professional Capital Services (PCS) | 95.5% |
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2 | DailyAccess Corp. | 92.3% |
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3 | John Hancock Retirement Plan Svcs. | 88.9% |
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4 | CPI Qualified Plan Consultants, Inc. | 88.6% |
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5 | Fidelity Advisors | 88.0% |
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6 | The Hartford | 84.1% |
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7 | The Newport Group | 83.3% |
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8 | Ascensus | 76.5% |
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9 | Bank of America Merrill Lynch | 71.4% |
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10 | Securian Financial Group | 70.0% |
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Percentage of clients with 7+ year relationships | |||
1 | CUNA Mutual Group | 90.4% |
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2 | Bank of America Merrill Lynch | 82.6% |
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3 | M&I Institutional Trust Services | 72.7% |
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4 | American Trust | 72.0% |
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5 | SunTrust Bank | 61.5% |
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6 | Principal Financial Group | 52.5% |
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7 | Correll Co. | 48.5% |
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8 | Wells Fargo | 45.8% |
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9 | ING | 45.0% |
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10 | OneAmerica (AUL) | 43.7% |
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Average client participation rate | |||
1 | American Trust | 83.8% |
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2 | M&I Institutional Trust Services | 79.4% |
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3 | CUNA Mutual Group | 79.1% |
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4 | Bank of America Merrill Lynch | 78.4% |
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5 | ING | 77.6% |
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6 | Retirement Alliance (RAI) | 75.6% |
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7 | DailyAccess Corp. | 75.3% |
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8 | Wells Fargo | 74.7% |
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9 | ExpertPlan, Inc. | 74.4% |
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10 | Mutual of Omaha | 74.2% |
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Percentage of clients offering participant advice | |||
1 | SunTrust Bank | 100.0% |
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2 | Fidelity Advisors | 96.3% |
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3 | DailyAccess Corp. | 92.9% |
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4 | Securian Financial Group | 90.9% |
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5 | CPI Qualified Plan Consultants, Inc. | 89.8% |
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6 | CUNA Mutual Group | 87.0% |
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7 | Bank of America Merrill Lynch | 86.7% |
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8 | The Hartford | 83.8% |
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9 | Professional Capital Services (PCS) | 83.3% |
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10 | Mutual of Omaha | 82.6% |
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Clients “extremely likely to recommend” provider | |||
1 | Securian Financial Group | 94.4% |
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2 | M&I Institutional Trust Services | 90.9% |
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3 | American Trust | 88.0% |
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4 | Retirement Alliance (RAI) | 87.0% |
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5 | MBM Advisors | 86.2% |
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6 | Ascensus | 84.9% |
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7 | The Newport Group | 82.8% |
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8 | Fidelity Advisors | 80.5% |
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9 | The Hartford | 80.3% |
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10 | Mutual of Omaha | 78.3% |
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1. Plan design elements | <$1MM | $1MM-$5MM |
Auto-enrollment | 17.9% | 21.1% |
Auto-deferral increases | 3.5% | 5.0% |
Written IPS | 24.5% | 41.2% |
Profit-sharing contribution | 35.8% | 49.9% |
Employer match | 68.8% | 72.6% |
Use a financial adviser | 57.6% | 63.6% |
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2. Plan participation rate | <$1MM | $1MM-$5MM |
Average | 67.1% | 69.9% |
Median | 75.0% | 75.0% |
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3. Participation eligibility | <$1MM | $1MM-$5MM |
Immediately upon hire | 16.3% | 18.1% |
Within 3 months | 23.5% | 23.3% |
After 4 to 6 months | 8.9% | 11.0% |
After more than 6 months | 51.3% | 47.6% |
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4. Approximate maximum match | <$1MM | $1MM-$5MM |
>100% of 6% of salary | 4.2% | 6.1% |
100% match of 6% | 12.9% | 9.5% |
51%–99% of 6% | 20.7% | 19.6% |
50% match of 6% | 33.4% | 29.5% |
<50% of 6% | 28.9% | 35.3% |
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5. Participants maximizing match | <$1MM | $1MM-$5MM |
All or nearly all participants (90% or more) | 33.5% | 27.2% |
Vast majority (75% or more) | 21.3% | 30.8% |
About half | 19.9% | 20.9% |
Less than half | 25.4% | 21.0% |
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6. When participants are 100% vested | <$1MM | $1MM-$5MM |
Immediately on enrollment | 32.2% | 22.9% |
6 months | 2.4% | 1.3% |
1 year | 11.2% | 6.2% |
2 years | 2.7% | 1.6% |
3 years | 9.0% | 10.5% |
4 years | 2.4% | 4.9% |
5 years | 21.6% | 27.6% |
After more than 5 years | 18.4% | 25.0% |
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7. Number of investment options offered | <$1MM | $1MM-$5MM |
Average | 28.3 | 20.9 |
Median | 17 | 19 |
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8. Number of investment options held | <$1MM | $1MM-$5MM |
Average | 6.8 | 7.3 |
Median | 5.0 | 5.0 |
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9. Participants with outstanding loans | <$1MM | $1MM-$5MM |
Average | 8.5% | 11.0% |
Median | 2.0% | 8.0% |
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10. Types of investment options offered | <$1MM | $1MM-$5MM |
Target-date funds | 44.1% | 55.1% |
Risk-based lifestyle funds | 28.1% | 30.7% |
Employer stock | 0.5% | 1.4% |
Self-directed brokerage | 5.3% | 6.4% |
Real estate | 12.3% | 17.0% |
Alternative investments | 5.3% | 5.2% |
ETFs | 1.4% | 1.5% |
After five years | 20.2% | 19.2% |
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11. Participants making hardship withdrawals | <$1MM | $1MM-$5MM |
Average | 1.9% | 1.9% |
Median | 0.0% | 1.0% |
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12. Investment committee for DC plan | <$1MM | $1MM-$5MM |
Employees only | 14.8% | 38.6% |
Non-employees only | 2.0% | 2.4% |
Employees & non-employees | 4.2% | 10.5% |
No investment committee | 79.0% | 48.5% |
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13. Participant services ratings (1–7 scale) | <$1MM | $1MM-$5MM |
Participant loan/withdrawal processing | 6.36 | 6.50 |
Participant statements | 6.39 | 6.47 |
Range of investment options | 6.24 | 6.38 |
Participant Web site functionality | 6.33 | 6.36 |
Participant call centers | 6.30 | 6.38 |
Enrollment assistance | 6.31 | 6.31 |
Retiree services/payments | 6.15 | 6.32 |
Participant beneficiary administration | 6.18 | 6.33 |
Online tools/savings & investing services | 6.21 | 6.33 |
Communication materials | 6.09 | 6.17 |
Onsite meetings | 5.88 | 6.10 |
Participant fee disclosure | 6.01 | 6.05 |
Overall education program | 5.93 | 6.05 |
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14. Sponsor services ratings (1–7 scale) | <$1MM | $1MM-$5MM |
Account/service team responsiveness | 6.49 | 6.60 |
Account/service team industry knowledge | 6.45 | 6.59 |
Staff consistency/lack of staff turnover | 6.44 | 6.55 |
Compliance support/testing | 6.43 | 6.49 |
Plan design flexibility | 6.34 | 6.47 |
Form 5500 processing | 6.33 | 6.40 |
Legislative/regulatory updates | 6.31 | 6.39 |
Sponsor Web site and tools | 6.33 | 6.39 |
“Cost-to-value” of plan fees | 6.15 | 6.26 |
Plan analytics/reporting/benchmarking | 6.22 | 6.28 |