Sponsors’ Fiduciary Awareness Deteriorating

Nearly half of sponsors do not think they are fiduciaries, up markedly from 30% in 2011.

Even though all plan sponsors are fiduciaries, 49% do not think they bear this responsibility, AllianceBernstein (AB) found in a survey. This is up from 37% of plan sponsors who said they are not fiduciaries in 2014 and 30% in 2011.

“Plan sponsors now face added responsibilities under the DOL’s [Department of Labor’s] new fiduciary rule, yet they’re less aware of their fiduciary status today than before,” says Jennifer DeLong, head of defined contribution (DC) at AB.

The survey also found that only 39% of the members of investment committees think they are fiduciaries, and the same can be said of 22% of administrative committee members. Even among those who say they are primarily responsible for the plan, 33% say they are not fiduciaries.

Fifty percent of the respondents who have access to a training program say it could be improved, and among the 80% who say their plans document the fiduciary process, 50% say it could be improved.

AB says that one way plan sponsors could improve their fiduciary knowledge and appreciation is by hiring an adviser or consultant. An added benefit of doing so is that advisers boost participation rates, with 49% of plans with an adviser seeing their participation rates rise, compared to 40% of plans without an adviser. Another benefit is an increase in deferrals (57% versus 37%) and improved retirement readiness outlook for participants (22% versus 11%).

Sixty percent of sponsors said they are concerned that participants do not know how much to save, and 54% said participants do not understand their investment options. AB says it is therefore encouraging that 40% of sponsors recently did a re-enrollment, and another 23% are considering doing so within the next two years. By comparison, in 2013, only 10% of sponsors said they would consider a re-enrollment.

Use of target-date funds (TDFs) continues to grow, AB says, particularly among micro plans with less than $1 million in assets, with their usage of TDFs rising from 33% in 2014 to 40% in 2017. Although 40% of sponsors are still using first-generation TDFs, many are moving towards collective investment trusts (CITs).

Forty percent of the sponsors AB surveyed offer financial wellness programs and say they have found they make their employees more productive and focused.