A news release said the survey found that 58% of plan sponsors maintain minutes of meetings (down from 79% last year), 27% use an independent party to analyze plan fees (down from 45% last year), and 29% reported that they had established a clear chain of authority for their plan’s governance committee (down from 41% last year).
“It has been said that ERISA’s fiduciary requirements are some of the highest under law, making it all the more critical for sponsors to be able to demonstrate how they make decisions and operate their plans in accordance with the law and plan documents,” said Debbie Smith, an employee benefits practice partner with Grant Thornton LLP, in the news release. “In an investigation, the DoL will not expect a sponsor to have the benefit of ’20/20 hindsight,’ but will look for a well documented and carefully undertaken decision-making process.”
Last year, more than half (55%) of plan sponsors surveyed were using a money-market fund or stable value product as the default investment, while this year a quarter (25%) are using these investments as the default. In contrast, last year 17% of plan sponsors were defaulting participants into a target-date or lifecycle fund, compared to 52% this year.
The survey also covered the Financial Accounting Standards Bureau (FASB) Statement No. 157, Fair Value Measurements (FAS 157), issued in September 2006, which will be effective for benefit plan financial statements issued for fiscal years beginning after November 15, 2007.
Even though the news release said FAS 157 is anticipated to have a significant effect on employee benefit plan financial reporting, only a little more than half (53%) of the respondents feel that they are ready to comply with it. Only 23% of the respondents have discussed with their plans’ third parties how they expect FAS 157 to affect their financial statements and benefit plans.
Drinker Biddle & Reath, Grant Thornton LLP, and Plan Sponsor Advisors conducted a confidential survey to gain a general assessment of the level of understanding of investments, fees, and administrative practices related to retirement plans. The survey was conducted online in October and November, with 275 independent plan sponsors participating.
More information is available at www.GrantThornton.com/benefitsaudit.