2020
PLANADVISER Recordkeeper Services Survey

DC Recordkeeping Industry Overview

The 2020 PLANADVISER Recordkeeper Services Survey utilizes data gathered in the 2020 PLANSPONSOR Recordkeeping Survey. That annual survey is compiled from self-reported data submitted by recordkeepers of defined contribution (DC) plans and highlights recordkeeper experience in servicing 401(k), 403(b) and 457 plans, among others.

With roughly $6 trillion in assets and totaling more than 575,000 plans, 401(k)s have come to dominate the retirement plan landscape, but the market is far from uniform: 92% of all 401(k)s each have less than $10 million in assets, while the top 0.12%—i.e., the 732 largest plans, each having over $1 billion in assets—control over half, 51%, of 401(k) assets.

Recordkeepers have adapted service models to meet needs of both small and large plans. Readers are encouraged to follow up with providers directly for details on the scope and availability of all service offerings. —Brian O’Keefe

Methodology

The 2020 PLANSPONSOR Recordkeeping Survey, conducted in May, received a total of 53 responses. The results represent over $8.2 trillion in defined contribution (DC) assets and, based on internal analysis, are estimated to account for 90% of the total DC market. Additional information is available online at plansponsor.com/research. Of the participating recordkeepers, 46 claim to serve the intermediary market and are featured in the grid on pages 26 and 27. Data on these firms highlight select features and capabilities that might be of interest to retirement plan advisers. Unless otherwise noted, all data reported are as of December 31, 2019. The pages that follow also summarize survey results by market and provider. For information on licensing the supporting data on all 53 recordkeepers or to learn how to participate in the 2021 PLANSPONSOR Recordkeeping Survey, please email surveys@issmediasolutions.com.

Total Defined Contribution (DC) Assets ($MM), Plans and Participants

Growth in Total DC Plan Assets ($MM)

DC Market Share, by Ranking of the 20 Largest Recordkeepers

401(k) Plans

Although employers have a choice as to the type of retirement plan they offer, 401(k) plans have clearly established themselves as the flagship retirement savings vehicle. With roughly $6 trillion in assets and totaling more than 575,000 plans, 401(k)s dwarf other defined contribution (DC) plan types and long ago surpassed their private defined benefit (DB) plan counterparts. As the market has grown, it has become somewhat defined by its imbalanced extremes: 92% of all 401(k) plans each have less than $10 million in assets, while the top 0.12%—i.e., the 732 largest plans, each having over $1 billion in assets—control 51% of 401(k) assets.

The opportunities and challenges that arise from such fragmentation have resulted in different servicing strategies. Small-plan sponsors may value the “high-touch” experience offered by smaller providers, while large-plan sponsors likely demand high-tech platforms capable of efficiently servicing the thousands of participants enrolled in their plans.

While it seems unlikely that the 401(k) plan’s dominance will be challenged anytime soon, providers are continuing to innovate in response to a changing market. A decade of legal challenges has heightened sponsor awareness of fiduciary practices, leading providers to improvements in regulatory and compliance services, cybersecurity initiatives and fee transparency. —BOK

Total 401(k) Assets ($MM), Plans and Participants

Growth in Total 401(k) Plan Assets ($MM)

403(b) Plans

The 403(b) market had crossed $1 trillion in assets at year-end last year, a notable accomplishment if not for the $6 trillion shadow cast by 401(k) plans. However, the differences between these plan types has started to blur as 403(b) sponsors, spurred by regulatory changes, have embraced their role as fiduciaries.

For example, many 403(b) plans used the recent remedial amendment period to improve their plan document(s), which helped simplify oversight of the multi-vendor arrangements common in the industry. However, over the past decade, the number of 403(b) plans that follow requirements set forth by the Employee Retirement Income Security Act (ERISA) has remained unchanged, hovering around 25%.

Collectively, 403(b) plans cover over 15 million workers in specialized industries such as education, hospitals, churches or religious organizations, and other nonprofit entities. The differing needs of these industries and the varying size of average participant account balances—e.g., those in higher education are twice those in K – 12 schools—have resulted in a range of service models catering to each sub-segment. Additionally, both local and national tax support is common for public worker plans.

Recordkeeping for 403(b) plan assets is more concentrated with a few providers than it is for 401(k) plans. The Top 5 403(b) providers account for 83% of all 403(b) assets; the Top 5 401(k) providers account for 63% of all 401(k) assets. —BOK

Total 403(b) Assets ($MM), Plans and Participants

Growth in Total 403(b) Plan Assets ($MM)

457 Plans

Although 457 plans operate similarly to more traditional defined contribution (DC) plans, they are also thought to be less accessible and more complex. Governmental 457(b) plans, which can resemble 401(k)s, are the largest subset of these plans and cover around 7 million state and local government employees, while nongovernmental 457 plans cover only 250,000 participants who must be highly compensated employees (HCEs). In both cases, the 457 plan is often supplementary to other retirement plan offerings—i.e., pensions or other eligible DC plans.

On the surface, 457s may be less successful than other DC plans at capturing participant savings, as the $51,520 average account balance is roughly 35% lower than the average saved in 401(k) plans—$79,720. However, such measures fail to account for participant savings in other accessible retirement plans and the limitations many public sector 457 plans face in offering features such as automatic enrollment and automatic escalation.

The specialized rules governing 457 plans mean providers can differentiate themselves based on the quality of participant servicing strategies, including successful enrollment materials, effective communication/education campaigns and financial wellness programs capable of guiding participants to improved outcomes. Retiree services can also be important, given some public sector employees are ineligible for Social Security. —BOK

Total Governmental 457 Assets ($MM), Plans and Participants

Growth in Total 457 Plan Assets ($MM)

NQDC Plans

Executive retirement plans generically referred to as nonqualified deferred compensation (NQDC)—i.e., because they give employers none of the tax benefits associated with qualified plans—are often small in size. Forty-three percent have fewer than five participants, respectively, but they can be an important benefit for highly compensated employees (HCEs). The Government Accountability Office (GAO) estimates that as much as 80% of the large public companies in the Standard & Poor (S&P)’s 500 offer such plans to top executives.

NQDC plan recordkeeping and third-party administrator (TPA) services are largely split into two camps: 1) specialists, who offer deep NQDC-specific expertise on plan design and administration, and 2) generalists, who offer administration of the plans as a convenient add-on to other products or services. Yet, the landscape of NQDC plan administrators capable of delivering on these value propositions continues to change as acquisitions and partnerships reshape the industry.

Whichever service strategy, successful NQDC plan administrators must possess the knowledge and systems necessary to manage the complexity of these plans, especially when markets become turbulent, as has been the case with the coronavirus pandemic. Providers that combine the best people, processes and technology can help both NQDC plan sponsors and participants avoid potential regulatory issues. —BOK

Total 409A^† Assets ($MM), Plans and Participants

Growth in Total NQDC Plan Assets ($MM)

SEP / SIMPLE Plans

This June, PLANADVISER launched its first survey of the employer-sponsored individual retirement account (IRA) plan market, focusing specifically on SEP [simplified employee pension] and SIMPLE [savings incentive match plan for employees] plans. The Investment Company Institute (ICI) estimates that 7.8 million U.S. households (6.1%) owned one of these accounts last year. While qualified plans such as 401(k)s, 403(b)s and 457s are more widely available, SEP and SIMPLE IRA plans have fewer rules and are easier to administer, which might make them an apt choice for employers with under 100 workers.

Methodology

The SEP/SIMPLE IRA Market Survey was open for response in June. PLANADVISER invited more than 25 providers of SEP and SIMPLE IRA plans to participate and received eight replies. The questionnaire explored investment options, fees and other provider capabilities. All reported data are as of December 31, 2019. Additional information is available online at planadviser.com/research. Readers are encouraged to follow up with providers directly for further details on the scope and availability of service offerings. For other information or to participate in future versions of the survey, please email surveys@issmediasolutions.com.

Small-Employer Plans

 702,374 total employer-sponsored retirement plans per DOL data.
 Of those, 616,554 plans (87%) had less than 100 employees.

Total SEP / SIMPLE Assets ($MM), Plans and Accounts

SEP / SIMPLE Plans, by Participant Count

 <5
 5–25
>25

SEP / SIMPLE Accounts, by Account Balance

 <$10,000
 $10,000 – $25,000
>$25,000 – $50,000
>$50,000 – $100,000
>$100,000