2013
Micro Plan Survey

As small businesses are the main employer of Americans, so
are micro plans—those holding less than $5 million in assets—the most common
retirement plan size. 

Story

As small businesses are the main employer of Americans, so
are micro plans—those holding less than $5 million in assets—the most common
retirement plan size. 

As small businesses are the main employer of Americans, so are micro plans—those holding less than $5 million in assets—the most common retirement plan size. As of December 31, 2011, 92% of defined contribution plans were micro plans, up from 90% the year before, and the number of these grew by 72,079 for a total of 668,994 plans with 16.85 million participants enrolled.

Micro plans are not simply miniature versions of their larger peers, however. These small plans have yet to adopt many of the sophisticated plan design elements that larger plans have embraced. For instance, a mere 15.5% of micro plans^ automatically increase participants’ contributions, compared with 28.6% of all plans. For plans with less than
$1 million in assets, the average participation rate is 60.6%. This ticks up to a participation rate of 71.2% for plans in the $1 million to $5 million range and to 72.6% for all plans.

Likewise, a mere 15.5% of micro plans have a written investment policy statement (IPS) to guide the decisions of their investment committee; among all plans, a written IPS is used by 28.6%. Forty-four percent of micro plans review investment options only once a year, whereas 39.0% of all plans have these discussions quarterly. However, smaller plans are more likely to rely on the services of a financial adviser. More than two-thirds (68.1%) of micro plans use one, compared with 66.4% of plans in general. That is, of course, if the micro plan has an investment committee. Nearly two in five (39.9%) operate without one, compared with 22.3% of all plans. Micro plans are also more often a safe harbor plan design (53.0% of micro plans, compared with 49.4% of all plans). They offer lifecycle and target-date funds (TDFs) less frequently than other plans (66.5% versus 76.3%) but are more likely to offer an exchange-traded fund (ETF)—1.3% of micro plans, compared with 0.9% of all plans.

 

* The 2013 Micro Plan Survey represents an analysis of data collected in PLANSPONSOR magazine’s 2012 Recordkeeping Survey and its 2012 DC Survey; ^ Data reflects micro plans in the $1 million to $5 million bracket, unless specifically stated that the figures are for plans valued at less than $1 million.       

 

Smaller plans are also more apt to make new hires wait several months before becoming eligible to participate in their DC plans. More than half (52.6%) of plans with less than $1 million in assets have a wait time threshold of six months, while this is the practice of less than half (46.4%) of plans in the $1 million to $5 million range and of less than a third (29.6%) of all plans. Conversely, 35.9% of employees at all plans are eligible immediately upon hire to contribute to their defined contribution plan, and only 29.6% of all plans make their employees wait six months.

Fewer smaller plans offer an employer match for contributions than do their larger peers: Only 61.5% of plans with less than $1 million in assets have a match. Seventy-five percent of all plans offer one, and 69.3% of plans with $1 million to $5 million in assets do.

Plan sponsors for micro plans are only slightly more likely than others to pay all the fees—46.2% versus 41.7%. —PA


METHODOLOGY: Between late June and mid-September 2012, approximately 49,000 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; 5,930 total usable responses were received by the close of the survey on September 23, 2012. Full survey results are available in the November 2012 issue of PLANSPONSOR and on http://plansponsor.com. Of these responses, 2,189 were from “micro” plans (<$5 million in DC plan assets). The micro plans were divided into two subcategories: <$1 million in plan assets (702 responses); and $1 million to $5 million in plan assets (1,487 responses). In order to qualify for rating in the survey, a provider needed at least 20 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. Only those providers winning at least one Best in Class award are listed in the Best in Class tables. 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).