RESEARCH | February 24, 2014

2014
Micro Plan Survey

Micro plans have unique plan design characteristics—and
challenges<br />2013 PLANADVISER Micro Plan Survey

Reported by PLANADVISER | Art by Shout

Micro Industry Data

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Micro Industry Data

Type(s) of DC Plan(s) Offered
	ALL MICRO	<$1MM	$1MM–$5MM
401(k)	91.5%	89.4%	92.3%
403(b)	6.3%	6.8%	6.2%
457	3.3%	3.0%	3.4%
Money purchase	1.0%	0.6%	1.1%
Profit sharing	18.1%	12.6%	20.3%
ESOP*/KSOPˆ	1.7%	0.4%	2.2%
Nonqualified deferred comp (NQDC)	1.1%	0.4%	1.4%
SEP˜/SIMPLE• IRAº	1.1%	2.6%	0.6%
Other	2.3%	2.2%	2.3%
Footnote: *Employee stock ownership plan; ˆA combined ESOP and 401(k) plan˜Simplified employee pension; • Savings incentive match plan for employees; º Individual retirement account

Adviser Use Among Plans
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	61.1%	58.0%	62.3%
No	38.9%	42.0%	37.7%

Adviser Fiduciary Status
	ALL MICRO	<$1MM	$1MM–$5MM
3(21) and 3(38) fiduciary	8.9%	7.3%	9.5%
3(21) fiduciary only	9.7%	7.3%	10.6%
3(38) fiduciary only	4.3%	4.6%	4.1%
None	34.3%	29.4%	36.1%
Don’t know	42.8%	51.5%	39.6%

Common Adviser Services
	ALL MICRO	<$1MM	$1MM–$5MM
Plan investment selection guidance	88.6%	86.5%	89.4%
Plan education	74.6%	65.9%	77.7%
IPS** review and monitoring	34.8%	29.8%	36.6%
Review of fund performance	77.7%	68.3%	81.1%
Present to investment committee	50.3%	31.7%	56.9%
Participant inv selection guidance	68.2%	64.7%	69.5%
Participant education	66.9%	59.1%	69.6%
Other	3.3%	3.6%	3.2%
Footnote: **Investment policy statement

Plan Design Elements
	ALL MICRO	<$1MM	$1MM–$5MM
Auto-enrollment	23.4%	21.4%	24.2%
Auto-deferral increases	12.1%	10.6%	12.7%
Written IPS
Loan provision	74.5%	71.9%	75.5%
Hardship withdrawal provision	85.6%	81.8%	87.1%
Safe harbor provision	58.0%	62.8%	56.2%
Roth 401(k) contribution	50.9%	46.6%	52.5%
Offer financial advice	76.5%	71.6%	78.4%

Auto-Enrollment Default Investment
	ALL MICRO	<$1MM	$1MM–$5MM
Target-date fund (TDF) (active)	20.2%	9.5%	23.4%
Target-date fund (indexed)	10.4%	6.0%	11.7%
Target-date fund (custom)	4.5%	6.0%	4.0%
Target-risk fund	3.4%	1.2%	4.0%
Balanced fund	19.9%	19.0%	20.1%
Professionally managed account	5.6%	11.9%	3.7%
Stable value fund/GICˆˆ	9.0%	14.3%	7.3%
Money market fund	18.8%	19.0%	18.7%
Other	8.4%	13.1%	7.0%
Footnote: ˆˆGuaranteed investment certificate

Auto-Enrollment Default Deferral Rate
	ALL MICRO	<$1MM	$1MM–$5MM
1%	10.8%	8.8%	11.4%
2%	10.2%	11.3%	9.9%
3%	43.5%	38.8%	44.9%
4%	9.4%	8.8%	9.6%
5%	6.8%	8.8%	6.3%
6%	8.0%	10.0%	7.4%
Other	11.4%	13.8%	10.7%

Participation Eligibility
	ALL MICRO	<$1MM	$1MM–$5MM
Immediately upon hire	18.1%	17.4%	18.4%
Within 3 months	22.6%	21.8%	22.9%
After 4 to 6 months	10.0%	7.6%	10.9%
After >6 months	49.4%	53.2%	47.9%
Don’t know	42.8%	51.5%	39.6%

Plan Participation Rate
	ALL MICRO	<$1MM	$1MM–$5MM
Average	74.2%	72.8%	74.8%
Median	80.0%	80.0%	80.0%

Approximate Maximum Match
	ALL MICRO	<$1MM	$1MM–$5MM
>100% of 6% of salary	7.1%	8.0%	6.9%
100% match of 6%	10.3%	12.9%	9.5%
51%–99% of 6%	31.4%	33.9%	30.7%
50% match of 6%	26.3%	21.4%	27.9%
<50% of 6%	24.7%	23.7%	25.1%

Participants Maximizing Match
	ALL MICRO	<$1MM	$1MM–$5MM
All or nearly all participants (>90%)	30.9%	37.1%	29.0%
Vast majority (>75%)	25.0%	20.5%	26.4%
> average (50%–75%)	19.4%	13.1%	21.4%
< average (25%–50%)	11.3%	10.9%	11.4%
A minority (10%–25%)	7.3%	6.6%	7.6%
Very few (<10%)	6.1%	11.8%	4.3%
Roth 401(k) contribution	50.9%	46.6%	52.5%
Offer financial advice	76.5%	71.6%	78.4%

Employer Contribution Types Made to Participant Accounts
	ALL MICRO	<$1MM	$1MM–$5MM
Match on participant contribution	58.4%	50.5%	61.4%
Profit-sharing contribution	26.9%	21.7%	28.9%
Nonelective contribution	8.6%	8.2%	8.8%
Other contribution	13.0%	12.0%	13.3%
No employer contribution	14.3%	21.5%	11.5%

When Participants Are 100% Vested
	ALL MICRO	<$1MM	$1MM–$5MM
Immediately on enrollment	31.7%	42.7%	28.3%
6 months	0.7%	0.9%	0.7%
1 year	5.0%	6.7%	4.5%
2 years	3.6%	2.2%	4.0%
3 years	9.5%	9.8%	9.4%
4 years	3.8%	1.3%	4.5%
5 years	26.4%	23.6%	27.2%
>5 years	19.4%	12.9%	21.3%

Frequency of Matching Contributions
	ALL MICRO	<$1MM	$1MM–$5MM
Each pay period	74.5%	76.1%	73.9%
Monthly	5.8%	7.0%	5.4%
Quarterly	1.9%	1.3%	2.0%
Annually	16.8%	13.9%	17.6%
Other	1.1%	1.7%	0.9%

Participants With Outstanding Loans
	ALL MICRO	<$1MM	$1MM–$5MM
Average	11.4%	10.0%	11.9%
Median	8.0%	5.0%	8.7%

Participants Making Hardship Withdrawals
	ALL MICRO	<$1MM	$1MM–$5MM
Average	1.7%	2.9%	1.3%
Median	0.0%	0.0%	0.0%

Number of Investment Options Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Average	21.3	20.4	21.6
Median	18.0	16.0	18.0

Number of Investment Options Held by Participants
	ALL MICRO	<$1MM	$1MM–$5MM
Average	6.6	6.5	6.7
Median	5.0	5.0	5.0

Types of Investment Options Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Target-date funds (TDFs)	58.8%	46.5%	62.4%
Target-risk funds	48.1%	49.7%	47.6%
Balanced funds	75.5%	69.0%	77.5%
Money market funds	73.7%	70.6%	74.6%
Employer stock	0.6%	1.1%	0.5%
Stable value funds	46.1%	33.7%	49.8%
Real estate/REITs~~	21.7%	16.6%	23.1%
Alternative investments	5.6%	9.6%	4.4%
Socially responsible funds	9.0%	8.0%	9.3%
Self-directed brokerage window	7.2%	4.8%	7.9%
Mutual fund window	16.2%	19.8%	15.1%
Footnote: ~~Real estate investment trusts

Custom Target-Date Fund Offerings
	ALL MICRO	<$1MM	$1MM–$5MM
Already in place	10.4%	8.3%	11.0%
Considering offering	8.4%	7.2%	8.8%
Have not considered	81.2%	84.5%	80.2%

Professionally Managed Accounts Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	30.8%	28.4%	31.6%
No	55.6%	54.0%	56.1%
Unsure	13.6%	17.7%	12.3%

Retirement Income Products Offered in Plan
	ALL MICRO	<$1MM	$1MM–$5MM
Annuities/Income w/ guarantees	6.6%	6.2%	6.7%
Annuities not offering guarantees	2.9%	1.9%	3.2%
Other products w/o guarantees	3.8%	1.4%	4.6%
Systematic withdrawals of balance	54.0%	48.4%	55.8%

Approximate Average Expense Ratio of Plan Investments
	ALL MICRO	<$1MM	$1MM–$5MM
<0.25% (<25 bps••)	6.3%	7.0%	6.1%
0.25%–0.50% (25–50 bps)	10.6%	10.2%	10.7%
0.51%–0.75% (51–75 bps)	7.9%	5.1%	8.8%
0.76%–1% (76–100 bps)	14.9%	7.4%	17.3%
1%–1.5% (101–150 bps)	14.2%	11.2%	15.2%
1.6%–2.0% (160–200 bps)	2.1%	0.9%	2.5%
2.1%–2.5% (210–250 bps)	0.3%	1.4%	0.0%
>2.5% (>250 bps)	0.0%	0.0%	0.0%
Don’t know	43.6%	56.7%	39.3%
Footnote: ••Basis points

% of Plan Investments That Use Passive/Indexed Strategies
	ALL MICRO	<$1MM	$1MM–$5MM
None	29.2%	41.9%	25.2%
0%–10%	21.7%	17.2%	23.1%
>10%–35%	28.8%	18.3%	32.1%
>35%–50%	9.3%	10.2%	9.0%
>50%–65%	4.1%	3.2%	4.3%
>65%–90%	3.3%	3.2%	3.3%
>90%	3.7%	5.9%	3.0%

Investment Vehicles Used in DC Plan
	ALL MICRO	<$1MM	$1MM–$5MM
Mutual funds	91.9%	88.5%	92.9%
Separate accounts	23.5%	23.5%	23.5%
Collective investment trust (CIT)	7.3%	9.0%	6.8%
ETFsºº (outside of brokerage windows)	3.4%	7.0%	2.2%
Other	4.4%	3.5%	4.7%
Footnote: ººExchange-traded funds

Frequency of Formal Review of Investment Options
	ALL MICRO	<$1MM	$1MM–$5MM
Monthly	0.8%	0.9%	0.7%
Quarterly	15.9%	10.4%	17.7%
Twice a year	14.4%	8.1%	16.4%
Annually	41.5%	37.8%	42.7%
Every 1 to 2 years	7.5%	11.3%	6.3%
Every >2 to 3 years	5.1%	6.3%	4.7%
Every 3-plus years	3.4%	3.2%	3.5%
Never	11.3%	22.1%	7.9%

Investment Committee for the DC Plan
	ALL MICRO	<$1MM	$1MM–$5MM
Employees only	31.0%	19.3%	34.7%
Non-employees only	1.6%	0.9%	1.9%
Employees and non-employees	16.7%	10.3%	18.8%
Unsure of composition	1.2%	1.3%	1.1%
No investment committee	46.2%	63.7%	40.6%
Don’t know if we have committee	3.3%	4.5%	2.9%

Investment Policy Statement for the DC plan
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	41.3%	28.1%	45.6%
No	40.6%	50.0%	37.5%
Don’t know	18.1%	21.9%	16.9%

Participant Services Ratings (1–7 scale; 7 = extremely satisfied)
	ALL MICRO	<$1MM	$1MM–$5MM
Participant call center	6.44	6.50	6.42
Website functionality	6.29	6.35	6.27
Online tools/services	6.27	6.31	6.26
Participant statements	6.49	6.49	6.49
Education program	6.05	6.08	6.04
Communication materials	6.14	6.22	6.11
Enrollment assistance	6.25	6.28	6.23
Retiree services/payments	6.38	6.42	6.37
On-site meetings	5.91	5.85	5.93
Range of investments	6.36	6.34	6.37
Loan/Withdrawal processing	6.51	6.57	6.49
Beneficiary administration	6.36	6.46	6.32
Participant fee disclosure	6.30	6.29	6.31

Sponsor Services Ratings (1–7 scale; 7 = extremely satisfied)
	ALL MICRO	<$1MM	$1MM–$5MM
Sponsor website/tools	6.27	6.32	6.25
Plan reports/benchmarking	6.21	6.26	6.20
Form 5500 processing	6.50	6.60	6.46
Compliance support/testing	6.48	6.51	6.47
Legislative/Regulatory updates	6.23	6.24	6.22
Account team knowledge	6.51	6.53	6.50
Service responsiveness	6.53	6.53	6.53
Staff consistency	6.46	6.49	6.45
Plan design flexibility	6.39	6.43	6.37
Fee “cost-to-value”	6.10	6.09	6.11

Length of Relationship With Provider
	ALL MICRO	<$1MM	$1MM–$5MM
Up to 1 year	5.7%	4.9%	6.1%
>1 year to 3 years	15.8%	19.9%	14.2%
>3 years to 5 years	16.7%	21.1%	15.0%
>5 years to 7 years	15.3%	16.0%	15.0%
>7 years	43.4%	34.9%	46.8%
Don’t know	3.1%	3.2%	3.0%

Frequency of Formal Review of Providers
	ALL MICRO	<$1MM	$1MM–$5MM
Annually	38.9%	38.0%	39.2%
Every 1 to 2 years	13.7%	13.0%	14.0%
Every >2 to 3 years	12.5%	10.2%	13.4%
Every >3 to 5 years	11.3%	7.7%	12.7%
Every 5-plus years	6.4%	4.9%	7.0%
Never	17.2%	26.2%	13.6%

Frequency of Formal Review of Administrative Costs/Fees
	ALL MICRO	<$1MM	$1MM–$5MM
Annually	56.9%	56.2%	57.1%
Every 1 to 2 years	14.1%	11.9%	14.7%
Every >2 to 3 years	10.4%	8.0%	11.2%
Every >3 to 5 years	5.6%	4.0%	6.1%
Every 5-plus years	3.6%	3.1%	3.8%
Never	9.4%	16.8%	7.1%

Who pays for the plan’s admin/recordkeeping costs?
	ALL MICRO	<$1MM	$1MM–$5MM
Participants—via direct fees	14.3%	13.5%	14.5%
Shared—participants and sponsors	14.4%	14.4%	14.3%
Sponsor/Employer pays directly	52.8%	56.8%	51.5%
None—fees paid by revenue sharing	5.9%	4.1%	6.5%
Unsure	12.7%	11.3%	13.2%

Calculated total admin fees (all sources) in the prior year?
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	38.6%	34.4%	39.9%
No	45.7%	49.1%	44.6%
Unsure	15.7%	16.5%	15.5%

If calculated, did you benchmark administrative fees?
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	56.4%	48.7%	58.6%
No	41.6%	48.7%	39.6%
Unsure	2.0%	2.6%	1.8%

Source of Fee Benchmarking Data
	ALL MICRO	<$1MM	$1MM–$5MM
Our current recordkeeper	30.2%	36.5%	28.5%
Our current plan adviser/consultant	42.0%	36.5%	43.4%
Adv/Consultant unaffiliated w/ plan	15.8%	10.8%	17.2%
Other sources	12.1%	16.2%	10.9%

Confidence Employees Will Achieve Retirement Goals by 65
	ALL MICRO	<$1MM	$1MM–$5MM
Very confident	3.5%	7.0%	2.4%
Confident	9.3%	8.9%	9.4%
Somewhat confident	27.3%	25.7%	27.9%
Only a little confident	26.4%	22.0%	27.9%
Not at all confident	23.8%	24.3%	23.7%
Unsure	9.6%	12.1%	8.8%