Some Plan Sponsors Still Hazy on PPA, Fiduciary Issues

A new AllianceBernstein study suggests that small-plan sponsors could use some help understanding the Pension Protection Act (PPA) and their fiduciary roles.
Some 29% of polled defined contribution plan sponsors at plans with less than $1 million in assets up to $10 million in assets reported being familiar or very familiar with how the PPA could help their participants.

An AllianceBernstein news release about its study of 1,000 plan sponsors, “Inside the Minds of Plan Sponsors,” said officials at large retirement savings programs did better on the PPA issue; 61% of plan sponsors with more than $250 million in assets said they know their way around the key pension reform law. 

The AllianceBernstein research also found that fiduciary understanding is still a significant challenge for many of the sponsors polled. Some 45% of micro-plan (less than $1 million in assets) or small-plan sponsors (between $1 million and $10 million in assets) do not see themselves as fiduciaries.

“It’s not surprising to see a significant disparity between plan sponsors from larger plans and those from smaller plans in terms of their understanding of fiduciary issues, as responsible executives at large companies usually have more focused roles and additional resources,” said Richard A. Davies, head of Product Strategy for AllianceBernstein Defined Contribution Investments (ABDC), in the news release. “This research demonstrates that there is a real opportunity for financial advisers and consultants to help the smaller plan sponsors who have limited time and resources to spend on their plans.”


Meanwhile, according to the research, 38% of micro- and small-plan sponsors are using a qualified default investment option (QDIA), such as a target-date or risk-based fund. In contrast, 56% of mega plans are currently doing so.

AllianceBernstein researchers commented: “While there is certainly room for more mega plans to adopt default options that are QDIA-compliant, these findings highlight the implications for smaller plans whose sponsors may not grasp the benefits—to them or their participants—of implementing a QDIA.”Getting Participants through Retirement

The AllianceBernstein study also found that plan sponsors across all plan sizes want to help employees—not just to retirement, but through retirement. Helping employees make better investment decisions (86%) and generate a retirement income stream (85%) are the two most important issues for plan sponsors, regardless of plan size. Plan sponsors’ single biggest worry is that participants will not accumulate enough to retire (46%).

The study also found that plan sponsors of all sizes are looking to their service providers for more help with fiduciary-related services. As compared to the last time this survey was done in 2005, plan sponsors now want more help with ongoing monitoring and reviews of investment options (89% in 2009 versus 46% in 2005), plan design or compliance updates (79% vs. 30%), and reviewing fiduciary responsibilities (78% vs. 24%).

The large majority of plan sponsors (72% micro/small and 83% mega) feel that reviewing fiduciary responsibilities is an important service to receive from their provider. Some 55% are comfortable or very comfortable that all relevant individuals at their organization are aware of their fiduciary status.