RESEARCH | February 8, 2016

2016
PLANADVISER Micro Plan Survey

Exploring the needs of micro plans

Reported by PLANADVISER | Art by Bill Mayer

Micro Industry Data

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2015 PLANADVISER Micro Plan Survey: Plan Benchmarking

Type(s) of DC Plan(s) Offered
	ALL MICRO	<$1MM	$1MM-$5MM
401(k)	91.6%	91.8%	91.5%
403(b)	6.9%	5.5%	7.5%
457	3.9%	2.4%	4.5%
Money purchase	1.5%	2.2%	1.3%
Profit sharing	17.1%	11.0%	19.7%
ESOP	1.6%	0.7%	2.0%
Nonqualified deferred compensation (NQDC)	0.9%	0.7%	1.0%
SEP/SIMPLE IRA	1.3%	1.2%	1.3%
Other	2.0%	2.4%	1.9%

Adviser Use Among Plans
	ALL MICRO	<$1MM	$1MM-$5MM
Yes	65.9%	58.2%	68.9%
No	34.1%	41.8%	31.1%

Adviser Fiduciary Status
	ALL MICRO	<$1MM	$1MM-$5MM
Yes – 3(38) fiduciary	19.0%	18.6%	19.2%
Yes – 3(21) fiduciary	20.8%	16.1%	22.4%
No	33.5%	33.1%	33.6%
Unsure/Don’t know	26.7%	32.2%	24.8%

Common Adviser Services
	ALL MICRO	<$1MM	$1MM-$5MM
Review of fund performance	89.8%	85.1%	91.3%
Plan investment selection guidance	87.3%	85.1%	88.1%
One-on-one participant education	74.2%	64.9%	77.3%
Evaluating/Explaining provider fees	72.8%	61.4%	76.7%
Group participant education	70.8%	57.0%	75.5%
Provider selection/due diligence	62.1%	51.8%	65.7%
Plan compliance with laws and IPS	51.7%	43.9%	54.3%
Investment committee fund review	51.4%	36.0%	56.7%
Benchmarking plan design	50.8%	44.7%	52.8%
Creation/Monitoring of IPS	46.1%	36.8%	49.3%

Plan Design Elements
	ALL MICRO	<$1MM	$1MM-$5MM
Automatic enrollment	22.0%	19.6%	22.9%
Automatic escalation	14.7%	11.5%	16.0%
Investment policy statement	42.7%	29.6%	47.8%
Loan provision	73.8%	73.8%	73.8%
Hardship withdrawal provision	88.3%	85.9%	89.2%
Safe harbor	60.7%	65.2%	59.1%
Roth feature	59.0%	55.6%	60.2%
Fee equalization policy	11.4%	7.9%	12.9%

Auto-Enrollment Default Deferral Rate
	ALL MICRO	<$1MM	$1MM-$5MM
<3%	18.0%	11.4%	20.4%
3%	46.6%	47.1%	46.4%
4%–5%	17.7%	21.4%	16.3%
>5%	15.8%	17.1%	15.3%
Unsure/Don’t know	1.9%	2.9%	1.5%

Re-Enrollment Actions Taken in Past 12–18 Months
	ALL MICRO	<$1MM	$1MM-$5MM
Non-participants	11.5%	6.9%	13.4%
Participants saving below default deferral	2.5%	1.7%	2.7%
Participants not in default investment	1.7%	0.0%	2.4%
No attempts to re-enroll any groups	87.2%	92.2%	85.2%

Financial Education Offered by Employers
	ALL MICRO	<$1MM	$1MM-$5MM
Investing basics/strategies	33.3%	24.7%	37.0%
Saving and budgeting	20.3%	14.5%	22.7%
Retiree health care planning	9.2%	7.0%	10.1%
Credit/Debt management	7.8%	6.8%	8.3%
Social Security strategies	6.4%	5.3%	6.9%
Tax/Estate planning	5.8%	4.6%	6.3%
College saving	5.1%	3.4%	5.8%
Home buying	4.4%	3.9%	4.6%
Long-term care	4.0%	3.9%	4.0%

Participation Eligibility
	ALL MICRO	<$1MM	$1MM-$5MM
Immediately upon hire	17.5%	16.2%	18.0%
Within 3 months of hire	22.0%	19.4%	23.0%
Within 4 to 6 months of hire	16.5%	15.5%	16.9%
After 6 months from date of hire	44.0%	48.9%	42.0%

Matching Contribution Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Yes	66.9%	58.2%	70.6%
No	31.4%	38.9%	28.2%
Unsure/Don’t know	1.7%	2.9%	1.2%

Approximate Maximum Match
	ALL MICRO	<$1MM	$1MM-$5MM
More than 100% of first 6% of salary	8.6%	7.9%	8.8%
100% of first 6% of salary	11.7%	13.3%	11.2%
51%–99% of first 6% of salary	25.3%	25.1%	25.4%
50% of first 6% of salary	19.5%	20.7%	19.1%
Less than 50% of first 6% of salary	26.6%	21.2%	28.3%
Other	8.4%	11.8%	7.2%

Frequency of Matching Contributions
	ALL MICRO	<$1MM	$1MM-$5MM
Annually or quarterly	18.3%	18.9%	18.1%
Monthly	7.6%	8.0%	7.5%
Twice monthly or biweekly	58.6%	58.4%	58.7%
Weekly	12.2%	13.0%	11.9%
Other	3.2%	1.7%	3.7%

Participants Maximizing Match
	ALL MICRO	<$1MM	$1MM-$5MM
All or nearly all participants (>90%)	33.0%	37.8%	31.3%
Vast majority (75%–90%)	19.1%	12.4%	21.4%
More than average (50%–75%)	19.5%	15.0%	21.0%
Less than average (25%–50%)	15.2%	17.2%	14.5%
A minority (10%–25%)	5.8%	7.7%	5.2%
Very few (<10%)	7.5%	9.9%	6.6%

“True Up”* Provision for Matching Contributions
	ALL MICRO	<$1MM	$1MM-$5MM
Yes	17.3%	15.2%	18.0%
No	48.8%	46.4%	49.6%
Unsure/Don’t know	34.0%	38.4%	32.5%
Footnote: *A true-up match may be used to restore matching contributions “lost” when an employee reaches the annual contribution limit prior to year-end.

When Participants Are 100% Vested
	ALL MICRO	<$1MM	$1MM-$5MM
Immediately on enrollment	31.5%	35.9%	30.0%
6 months	0.9%	2.1%	0.4%
1 year	3.5%	5.5%	2.8%
2 years	2.2%	3.0%	1.9%
3 years	7.9%	9.7%	7.3%
4 years	3.4%	3.0%	3.5%
5 years	25.3%	24.5%	25.6%
>5 years	25.4%	16.5%	28.5%

Participants With Loans Outstanding
	ALL MICRO	<$1MM	$1MM-$5MM
Average	10.3%	9.5%	10.7%
Median	6.0%	2.0%	8.0%

Participants Making Hardship Withdrawals
	ALL MICRO	<$1MM	$1MM-$5MM
Average	1.1%	0.8%	1.2%
Median	0.0%	0.0%	0.0%

Number of Investment Options Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Average	23.5	21.1	24.2
Median	20.0	19.0	20.0

Number of Investment Options Held by Participants
	ALL MICRO	<$1MM	$1MM-$5MM
Average	5.7	5.8	5.7
Median	5.0	4.0	5.0

Types of Investment Options Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Target-date funds	66.9%	58.5%	70.1%
Target-risk funds	54.8%	53.8%	55.2%
Balanced fund(s)	73.0%	65.4%	76.0%
Money market fund	63.9%	57.9%	66.3%
Stable value fund	41.3%	32.1%	44.9%
Employer stock	1.8%	1.6%	1.8%
Real estate/REITs	22.3%	18.9%	23.7%
Alternative investments	5.1%	5.0%	5.1%
Socially responsible fund(s)	10.5%	12.6%	9.7%
Participant-managed account service	28.1%	28.0%	28.2%

Results
	ALL MICRO	<$1MM	$1MM-$5MM
Participation rate (average)	73.1%	69.8%	74.4%
Participation rate (median)	80.0%	79.0%	80.0%
Account balance (average)	$69,868	$51,610	$76,980
Account balance (median)	$50,000	$31,083	$58,163

Income-Oriented Products/Services Offered
	ALL MICRO	<$1MM	$1MM-$5MM
In-plan: guaranteed monthly income**	5.8%	6.6%	5.5%
In-plan: guaranteed minimum benefit***	2.2%	2.0%	2.3%
In-plan: no guarantees	6.9%	5.6%	7.4%
Out-of-plan: annuity purchase	0.9%	1.0%	0.8%
No income-oriented products	50.1%	49.5%	50.3%
Unsure of income product type	37.1%	37.4%	37.0%
Footnote: E.g., deferred fixed annuities, guaranteed minimum income benefits (GMIBs). *E.g., guaranteed minimum withdrawal benefits (GMWBs), deferred variable annuities.

Investment Vehicles Used in DC Plan
	ALL MICRO	<$1MM	$1MM-$5MM
Mutual funds	89.8%	87.2%	90.8%
Separate accounts	22.2%	19.9%	23.1%
Collective investment trusts (CITs)	7.2%	7.1%	7.3%
ETFs (outside of brokerage windows)	12.0%	11.0%	12.3%
Self-directed brokerage window	7.5%	6.3%	8.0%
Mutual fund window	5.5%	5.7%	5.4%
Other	5.7%	7.1%	5.1%

Frequency of Formal Review of Investment Options
	ALL MICRO	<$1MM	$1MM-$5MM
Quarterly	16.9%	14.1%	17.9%
Twice a year	12.4%	7.1%	14.5%
Annually	48.0%	42.9%	50.0%
Every 1 to 2 years	6.3%	8.6%	5.4%
Every >2 to 3 years	4.7%	5.1%	4.6%
Every >3 years	2.9%	4.5%	2.2%
Never	8.9%	17.7%	5.4%

Approximate Average Expense Ratio of Plan Investments
	ALL MICRO	<$1MM	$1MM-$5MM
<0.25% (<25 bps)	7.0%	9.9%	5.9%
0.25%–0.50% (25–50 bps)	13.4%	9.1%	15.2%
>0.50%–0.75% (51–75 bps)	8.4%	5.4%	9.6%
>0.75%–1.0% (76–100 bps)	11.0%	7.1%	12.6%
>1.0%–1.5% (101–150 bps)	9.4%	7.6%	10.2%
>1.5%–2.0% (151–200 bps)	1.7%	2.5%	1.3%
>2.0%–2.5% (201–250 bps)	0.7%	1.4%	0.5%
>2.5% (>250 bps)	0.3%	0.6%	0.2%
Unsure/Don’t know	48.0%	56.4%	44.5%

Frequency of Formal Review of Administrative Costs/Fees
	ALL MICRO	<$1MM	$1MM-$5MM
Annually	71.7%	67.3%	73.5%
Every 1 to 2 years	10.9%	9.9%	11.3%
Every >2 to 3 years	5.4%	5.9%	5.2%
Every >3 to 5 years	1.3%	1.5%	1.2%
Every >5 years	1.5%	2.3%	1.2%
Unsure/Don’t know	9.3%	13.0%	7.7%

Paying for Plan’s Administrative/Recordkeeping Costs
	ALL MICRO	<$1MM	$1MM-$5MM
Participants – via direct fees	15.1%	12.1%	16.3%
Shared – participants and sponsors	20.5%	14.2%	23.1%
Sponsor/Employer pays directly	47.1%	59.2%	42.1%
None – fees paid by revenue sharing	5.3%	2.6%	6.4%
Unsure/Don’t know	12.0%	11.9%	12.1%

Total Plan Fees Calculated for the Prior Plan Year
	ALL MICRO	<$1MM	$1MM-$5MM
Yes, and we externally benchmarked our plan’s cost/fees as part of the process	18.7%	12.8%	21.2%
Yes, and we plan to externally benchmark our plan’s cost/fees in the near future	4.5%	2.9%	5.2%
Yes, but we did not externally benchmark our plan’s cost/fees	14.5%	14.1%	14.7%
No, but we intend to calculate total fees in the next 6 months	4.8%	5.0%	4.8%
No, but we may do it at some point in the future	28.4%	31.4%	27.1%
Unsure/Don’t know	29.0%	33.8%	27.0%

Length of Relationship With Provider
	ALL MICRO	<$1MM	$1MM-$5MM
Up to 1 year	4.8%	6.5%	4.1%
>1 year to 3 years	17.3%	20.2%	16.0%
>3 years to 5 years	15.9%	17.1%	15.4%
>5 years to 7 years	12.4%	10.3%	13.2%
>7 years	46.3%	40.9%	48.5%
Unsure/Don’t know	3.4%	5.0%	2.7%

Frequency of Formal Review of Providers
	ALL MICRO	<$1MM	$1MM-$5MM
Annually	64.0%	58.5%	66.3%
Every 1 to 2 years	10.1%	9.9%	10.1%
Every >2 to 3 years	6.9%	7.0%	6.8%
Every >3 to 5 years	5.2%	4.8%	5.4%
Every >5 years	2.2%	2.7%	2.0%
Unsure/Don’t know	11.6%	17.1%	9.3%

Investment Committee for the DC Plan
	ALL MICRO	<$1MM	$1MM-$5MM
Internal employees only	26.4%	17.9%	29.8%
External non-employees only	2.0%	2.5%	1.8%
Employees and non-employees	20.7%	9.5%	25.2%
Unsure of composition	1.7%	0.5%	2.2%
No investment committee	43.3%	62.2%	35.8%
Unsure/Don’t know	5.8%	7.5%	5.2%

Number of Responsible Plan Fiduciaries (RPFs) in Plan~
	ALL MICRO	<$1MM	$1MM-$5MM
One person	27.6%	35.1%	24.6%
2 or 3 people	44.1%	35.1%	47.6%
4 or 5 people	6.5%	2.5%	8.1%
More than 5 people	3.3%	1.5%	4.0%
Unsure/Don’t know	18.6%	25.7%	15.7%
Footnote: ~408(b)2 defines an RPF as “a fiduciary with authority to cause the covered plan to enter into, or extend or renew, the contract or arrangement.” In other words, it is the person or committee who has the power to hire and fire the particular service provider, e.g., the broker/dealer, recordkeeper or RIA.

Investment Advice Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Financial planner/adviser – on-site	45.1%	32.1%	50.6%
Financial planner/adviser – phone-based	23.3%	16.4%	26.2%
Independent third party^	11.0%	7.4%	12.5%
Provider’s proprietary services/tools	20.7%	15.9%	22.7%
Through another source	4.8%	4.7%	4.8%
Total offering advice	70.4%	58.8%	75.3%
No advice offered	29.6%	41.2%	24.7%
Footnote: ^E.g., Financial Engines, Morningstar.

Targeted Education/Communications to Participants
	ALL MICRO	<$1MM	$1MM-$5MM
Rolling over past plan balances into current plan	27.9%	24.4%	29.3%
Taking a pre-retirement distribution	16.6%	14.7%	17.4%
Distribution/Rollover options upon separation	33.2%	26.6%	36.0%
Income/Distribution options upon retirement	21.1%	15.4%	23.5%

Level of Agreement (% agree or slightly agree)
	ALL MICRO	<$1MM	$1MM-$5MM
Organization prefers past employees remain in plan	23.6%	21.0%	24.7%
Most employees will achieve retirement goals by 65	25.4%	29.9%	23.7%
Our plan will likely add retirement income products	28.2%	33.2%	26.3%
DOL’s disclosure rules helped us understand plan fees	51.3%	49.5%	52.1%

Success Measures Used
	ALL MICRO	<$1MM	$1MM-$5MM
Participation rates	45.4%	33.5%	50.2%
Deferral rates	32.7%	22.3%	36.8%
Participants saving to match	11.9%	6.6%	14.0%
Participants increasing deferral rates in past year	6.2%	2.5%	7.7%
Participants with “appropriate” asset allocations	5.8%	6.6%	5.5%
Participants using plan advice tools/seminars	4.6%	2.5%	5.5%
Participants meeting retirement income goals	3.3%	2.5%	3.7%
Participants meeting income replacement goals	2.5%	2.5%	2.4%
Employee satisfaction with plan (through survey)	14.5%	12.7%	15.2%
External/competitive benchmarking of plan design	14.5%	8.1%	17.1%
We have no formal plan success measures	42.7%	56.3%	37.2%