RESEARCH | February 20, 2015

2015
PLANADVISER Micro Plan Survey

The unique opportunities of micro plans

Reported by PLANADVISER | Art by Sam Lynn

Micro Industry Data

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2014 PLANADVISER Micro Plan Survey: Plan Benchmarking

Type(s) of DC Plan(s) Offered
	ALL MICRO	<$1MM	$1MM–$5MM
401(k)	92.1%	90.8%	92.6%
403(b)	5.9%	5.7%	6.0%
457	3.8%	2.2%	4.5%
Money purchase	1.2%	1.0%	1.2%
Profit sharing	19.6%	15.3%	21.4%
ESOP*/KSOPˆ	1.7%	0.0%	2.4%
Nonqualified deferred comp (NQDC)	1.5%	0.7%	1.8%
SEP˜/SIMPLE• IRA	0.8%	2.2%	0.2%
Other	1.5%	1.2%	1.7%
Footnote: *Employee stock ownership plan; ˆA combined ESOP and 401(k) plan ˜Simplified employee pension; • Savings incentive match plan for employees

Adviser Use Among Plans
	ALL MICRO	<$1MM	$1MM–$5MM
Use adviser	52.0%	43.7%	55.4%
Do not use adviser	46.0%	52.5%	43.3%

Adviser Fiduciary Status
	ALL MICRO	<$1MM	$1MM–$5MM
3(21) and 3(38) fiduciary	10.4%	11.6%	10.0%
3(21) fiduciary only	12.6%	11.0%	13.1%
3(38) fiduciary only	6.5%	5.2%	6.9%
Adviser is not a fiduciary	34.1%	26.7%	36.5%
Don't know	36.4%	45.3%	33.4%

Common Adviser Services
	ALL MICRO	<$1MM	$1MM–$5MM
Review of fund performance	90.6%	86.8%	91.8%
Plan investment selection guidance	87.6%	85.0%	88.4%
Evaluating/Explaining provider fees	72.8%	68.9%	74.1%
Group participant education	70.7%	61.1%	73.9%
One-on-one participant education	70.1%	69.5%	70.3%
Provider selection/due diligence	59.0%	55.1%	60.3%
Benchmarking plan design	52.1%	41.9%	55.5%
Plan compliance with laws and IPS**	47.9%	47.3%	48.1%
Footnote: **Investment policy statement

Plan Design Elements
	ALL MICRO	<$1MM	$1MM–$5MM
Auto-enrollment	19.2%	17.2%	20.0%
Auto-escalation	7.9%	6.5%	8.4%
Investment policy statement	43.6%	31.8%	48.5%
Loan provision	71.0%	62.7%	74.5%
Hardship withdrawal provision	84.9%	79.9%	86.9%
Safe harbor	55.7%	57.6%	55.0%
Roth feature	49.4%	45.2%	51.0%
Fee equalization policy	9.1%	6.6%	10.1%

Financial Education Offered by Employers
	ALL MICRO	<$1MM	$1MM–$5MM
Saving and budgeting	19.3%	14.0%	21.6%
Investing basics/strategies	34.2%	24.0%	38.6%
Credit/Debt management	6.0%	4.0%	6.9%
Home buying	3.4%	2.3%	3.9%
College saving	4.6%	3.5%	5.0%
Social Security strategies	4.7%	3.5%	5.2%
Tax/Estate planning	4.7%	4.3%	4.9%
Retiree health care planning	9.8%	6.5%	11.2%
Long-term care	4.6%	3.0%	5.3%

Auto-Enrollment Default Deferral Rate
	ALL MICRO	<$1MM	$1MM–$5MM
1%	10.0%	2.6%	12.9%
2%	10.0%	11.8%	9.3%
3%	41.1%	42.1%	40.7%
4%	8.5%	3.9%	10.3%
5%	6.3%	7.9%	5.7%
6%	10.4%	13.2%	9.3%
Other	13.7%	18.4%	11.9%

Participation Eligibility
	ALL MICRO	<$1MM	$1MM–$5MM
Immediately upon hire	18.2%	19.8%	17.5%
Within 3 months of hire	23.4%	19.6%	25.1%
Within 4 to 6 months of hire	11.3%	8.9%	12.3%
After 6 months from date of hire	47.1%	51.7%	45.2%

Results
	ALL MICRO	<$1MM	$1MM–$5MM
Participation rate (average)	74.2%	72.6%	74.9%
Participation rate (median)	80.0%	80.0%	80.0%
Account balance (average)	$71,483	$47,794	$81,122
Account balance (median)	$50,000	$32,815	$62,940

Matching Contribution Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	59.6%	49.2%	64.4%
No	39.3%	48.5%	35.0%
Don’t know	1.1%	2.3%	0.5%

Approximate Maximum Match
	ALL MICRO	<$1MM	$1MM–$5MM
More than 100% of first 6% of salary	6.3%	6.5%	6.3%
100% of first 6% of salary	7.4%	8.9%	6.8%
51%–99% of first 6% of salary	21.3%	22.0%	21.0%
50% of first 6% of salary	22.3%	22.8%	22.2%
Less than 50% of first 6% of salary	34.9%	30.1%	36.6%
Other	7.8%	9.8%	7.1%

Frequency of Matching Contributions
	ALL MICRO	<$1MM	$1MM–$5MM
Each pay period	68.2%	68.8%	68.0%
Monthly	6.9%	6.5%	7.0%
Quarterly	2.4%	1.5%	2.7%
Annually	16.6%	18.6%	15.8%
Other	1.7%	2.3%	1.5%

Participants Maximizing Match
	ALL MICRO	<$1MM	$1MM–$5MM
All or nearly all participants (>90%)	35.5%	35.1%	35.6%
Vast majority (75%–90%)	19.1%	16.8%	20.0%
More than average (50%–75%)	15.7%	14.1%	16.2%
Less than average (25%–50%)	13.3%	13.4%	13.3%
A minority (10%–25%)	7.0%	8.4%	6.5%
Very few (<10%)	9.4%	12.2%	8.3%

When Participants Are 100% Vested
	ALL MICRO	<$1MM	$1MM–$5MM
Immediately on enrollment	32.0%	40.9%	28.8%
6 months	1.3%	1.5%	1.2%
1 year	6.1%	12.4%	4.0%
2 years	2.2%	1.9%	2.3%
3 years	9.9%	8.1%	10.5%
4 years	2.9%	1.9%	3.3%
5 years	24.6%	17.0%	27.3%
>5 years	21.0%	16.2%	22.6%

Participants With Outstanding Loans
	ALL MICRO	<$1MM	$1MM–$5MM
Average	10.8%	7.8%	11.8%
Median	8.0%	3.0%	10.0%

Participants Making Hardship Withdrawals
	ALL MICRO	<$1MM	$1MM–$5MM
Average	0.9%	0.7%	1.0%
Median	0.0%	0.0%	0.0%

Number of Investment Options Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Average	22.4	23.2	22.1
Median	20.0	24.0	20.0

Number of Investment Options Held by Participants
	ALL MICRO	<$1MM	$1MM–$5MM
Average	5.4	4.6	5.8
Median	4.6	4.0	5.0

Types of Investment Options Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Target-date funds	56.9%	48.2%	60.3%
Target-risk funds*	50.2%	50.3%	50.2%
Balanced funds	72.5%	64.6%	75.6%
Money market fund	65.5%	62.2%	66.8%
Employer stock	1.4%	1.5%	1.3%
Stable value fund	38.6%	25.3%	43.7%
Real estate/REITS†	22.9%	17.7%	24.9%
Alternative investments‡	4.8%	5.2%	4.6%
Socially responsible funds	9.1%	9.8%	8.9%
Footnote: ***E.g., “growth,” “conservative †real estate investment trusts‡e.g., hedge funds, private equity

Custom Target-Date Fund Offerings
	ALL MICRO	<$1MM	$1MM–$5MM
Yes—considering	7.7%	7.5%	7.8%
No—have not considered	85.3%	87.1%	84.7%
Already in place	7.0%	5.4%	7.6%

Professionally Managed Accounts Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	36.9%	39.0%	36.0%
No	63.1%	61.0%	64.0%

Does plan include provision to “true upˆ” matching contributions?
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	17.1%	15.5%	17.6%
No	54.5%	48.8%	56.5%
Don’t know	28.4%	35.7%	25.8%
Footnote: ˆA true-up match may be used to restore matching contributions “lost” when an employee reaches the annual contribution limit prior to year-end.

Income-Oriented Products/Services Offered in Plan
	ALL MICRO	<$1MM	$1MM–$5MM
In-plan: guaranteed monthly income•	6.6%	6.6%	6.6%
In-plan: guaranteed minimum benefit º	3.4%	3.7%	3.3%
In-plan: no guarantees	6.7%	5.5%	7.2%
Out-of-plan: annuity purchase	2.5%	1.4%	3.0%
Unsure of income product type	47.9%	52.3%	46.2%
No income-oriented products	37.4%	34.2%	38.7%
Footnote: •E.g., deferred fixed annuities, guaranteed minimum income benefits (GMIBs) ºe.g., guaranteed minimum withdrawal benefits (GMWBs), deferred variable annuities

If no retirement income products are offered, any plans to offer?
	ALL MICRO	<$1MM	$1MM–$5MM
Yes—we expect to offer income products in the next 12–24 months	0.9%	0.9%	0.9%
Maybe—we are considering it	11.8%	10.3%	12.3%
No—we have decided not to act at this time	8.1%	8.5%	7.9%
No—we have not researched income options and have no plans to	49.3%	57.3%	46.6%
Don’t know	29.9%	23.1%	32.3%

Approximate Average Expense Ratio of Plan Investments
	ALL MICRO	<$1MM	$1MM–$5MM
<0.25% (<25 bps)	6.3%	7.7%	5.8%
0.25%–0.50% (25–50 bps)	10.7%	9.3%	11.2%
>0.50%–0.75% (51–75 bps)	7.4%	2.6%	9.4%
>0.75%–1.0% (76–100 bps)	9.5%	5.6%	11.1%
>1.0%–1.5% (101–150 bps)	10.0%	6.1%	11.7%
>1.5%–2.0% (151–200 bps)	1.9%	2.6%	1.5%
>2.0%–2.5% (201–250 bps)	0.3%	0.5%	0.2%
>2.5% (>250 bps)	0.1%	0.3%	0.0%
Don’t know	53.7%	65.1%	49.1%

Investment Vehicles Used in DC Plan
	ALL MICRO	<$1MM	$1MM–$5MM
Mutual funds	89.9%	88.3%	90.5%
Separate accounts	22.4%	19.5%	23.6%
Collective investment trust (CIT)	8.7%	8.7%	8.7%
ETFs (outside of brokerage windows)	10.4%	12.0%	9.7%
Self-directed brokerage window	7.3%	3.3%	8.8%
Mutual fund window	4.7%	3.9%	5.0%
Other	4.8%	4.8%	4.8%

Re-enrollment Actions Taken in Past 12–18 Months
	ALL MICRO	<$1MM	$1MM–$5MM
Non-participants	8.7%	9.5%	8.4%
Ppts saving below default deferral	2.5%	6.3%	1.1%
Participants not in default investment	0.8%	1.6%	0.6%
No attempts to re-enroll any groups	89.6%	85.7%	91.0%

Frequency of Formal Review of Providers
	ALL MICRO	<$1MM	$1MM–$5MM
Annually	61.3%	58.7%	62.5%
Every 1 to 2 years	11.8%	11.2%	12.0%
Every >2 to 3 years	7.8%	6.2%	8.4%
Every >3 to 5 years	3.5%	2.5%	3.9%
Every 5-plus years	1.6%	1.2%	1.7%
Don’t know	14.1%	20.1%	11.6%

Frequency of Formal Review of Administrative Costs/Fees
	ALL MICRO	<$1MM	$1MM–$5MM
Annually	66.4%	61.9%	68.3%
Every 1 to 2 years	9.6%	8.3%	10.1%
Every >2 to 3 years	5.7%	6.2%	5.6%
Every >3 to 5 years	2.6%	2.1%	2.8%
Every 5-plus years	1.6%	2.3%	1.3%
Don’t know	14.1%	19.2%	12.0%

Frequency of Formal Review of Investment Options
	ALL MICRO	<$1MM	$1MM–$5MM
Monthly	1.2%	1.3%	1.1%
Quarterly	14.1%	9.3%	16.0%
Twice a year	10.2%	8.0%	11.1%
Annually	50.8%	44.1%	53.5%
Every 1 to 2 years	6.8%	9.8%	5.6%
Every >2 to 3 years	3.0%	4.3%	2.5%
Every 3-plus years	2.9%	3.2%	2.8%
Never	11.1%	19.9%	7.5%

Who pays for the plan’s administrative/recordkeeping costs?
	ALL MICRO	<$1MM	$1MM–$5MM
Participants—via direct fees	14.3%	9.2%	16.4%
Shared—participants and sponsors	17.1%	15.7%	17.7%
Sponsor/Employer pays directly	47.1%	54.1%	44.3%
None—fees paid by revenue sharing	7.3%	5.2%	8.2%
Don’t know	14.1%	15.7%	13.4%

Were total plan fees calculated for the prior plan year?
	ALL MICRO	<$1MM	$1MM–$5MM
Yes	36.6%	30.0%	39.3%
No	40.7%	44.1%	39.3%
Don’t know	22.8%	25.8%	21.5%

Length of Relationship With Provider
	ALL MICRO	<$1MM	$1MM–$5MM
Up to 1 year	2.9%	4.0%	2.5%
>1 year to 3 years	21.7%	30.7%	18.0%
>3 years to 5 years	15.8%	16.3%	15.6%
>5 years to 7 years	14.7%	13.1%	15.4%
>7 years	40.6%	30.2%	44.9%
Don’t know	4.2%	5.7%	3.6%

Investment Committee for the DC Plan
	ALL MICRO	<$1MM	$1MM–$5MM
Internal employees only	24.7%	13.4%	29.5%
External non-employees only	1.7%	1.5%	1.8%
Employees and non-employees	17.0%	7.3%	21.0%
Unsure of composition	1.6%	1.0%	1.8%
No investment committee	45.4%	63.4%	37.9%
Don’t know	9.6%	13.4%	8.0%

Number of Responsible Plan Fiduciaries (RPFs) in Plan#
	ALL MICRO	<$1MM	$1MM–$5MM
One person	28.8%	34.2%	26.5%
2 or 3 people	40.1%	28.8%	44.8%
4 or 5 people	8.4%	4.1%	10.2%
More than 5 people	1.8%	1.3%	2.0%
Don’t know	20.9%	31.6%	16.5%
Footnote: #As defined by regulation 408(b)(2): a fiduciary with authority to cause the covered plan to enter into, or extend or renew, a contract or arrangement

Attempts to Limit Participant Pre-retirement Access/Withdrawals
	ALL MICRO	<$1MM	$1MM–$5MM
Limit loan amounts	53.6%	32.5%	62.0%
Limit number of loans	50.5%	27.2%	59.7%
Increased loan/withdrawal charges	10.0%	4.6%	12.1%
Rollover management service	2.6%	4.2%	1.9%
Discourage early access	10.6%	9.9%	10.9%
No steps taken to limit access	34.2%	55.1%	25.9%

Investment Advice Offered
	ALL MICRO	<$1MM	$1MM–$5MM
Outside financial planner/adviser	41.6%	36.9%	43.6%
Independent third party§	14.4%	10.6%	16.0%
Provider’s proprietary services/tools	19.0%	12.3%	21.8%
Through another source	4.2%	2.8%	4.8%
Total offering advice	68.1%	57.5%	72.5%
No advice offered	31.9%	42.5%	27.5%
Footnote: §E.g., Financial Engines, Morningstar

Agree/Disagree: Employees Will Achieve Retirement Goals by 65
	ALL MICRO	<$1MM	$1MM–$5MM
Agree	9.4%	10.8%	8.9%
Slightly Agree	18.8%	19.6%	18.5%
Undecided	25.0%	24.1%	25.3%
Slightly Disagree	26.3%	23.4%	27.2%
Disagree	20.5%	22.2%	20.0%
Unsure	9.6%	12.1%	8.8%