RESEARCH | February 6, 2017

2017
PLANADVISER Micro Plan Survey

Small plans are big business.

Reported by PLANADVISER | Art by Marcos Chin

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%	91%	91%
403(b)	6%	5%	7%
457	4%	3%	5%
Money purchase	1%	1%	1%
Profit sharing	17%	13%	19%
ESOP	1%	0%	2%
Nonqualified deferred compensation (NQDC)	1%	1%	2%
SEP/SIMPLE IRA	1%	1%	0%
Other	3%	3%	3%

Adviser Use Among Plans
	ALL MICRO	<$1MM	$1MM-$5MM
Yes	59%	47%	64%
No	41%	53%	36%

Adviser Fiduciary Status
	ALL MICRO	<$1MM	$1MM-$5MM
Yes – 3(38) fiduciary	15%	11%	17%
Yes – 3(21) fiduciary	24%	20%	25%
No	22%	23%	21%
Unsure/Don’t know	40%	46%	37%

Common Adviser Services
	ALL MICRO	<$1MM	$1MM-$5MM
Review of fund performance	91%	86%	93%
Plan investment selection guidance	90%	82%	92%
Evaluating/Explaining provider fees	75%	66%	78%
One-on-one participant education	75%	66%	77%
Group participant education	72%	64%	74%
Provider selection/due diligence	60%	47%	64%
Investment committee fund review	58%	42%	63%
Plan compliance with laws and IPS	56%	44%	59%
Benchmarking plan design	56%	42%	60%
Creation/Monitoring of IPS	49%	39%	52%

Plan Design Elements
	ALL MICRO	<$1MM	$1MM-$5MM
Automatic enrollment	25%	24%	25%
Automatic escalation	15%	15%	16%
Investment policy statement	42%	28%	49%
Loan provision	70%	68%	71%
Safe harbor	63%	68%	61%
Roth feature	60%	56%	62%
Fee equalization policy	12%	7%	14%

Auto-Enrollment Default Deferral Rate
	ALL MICRO	<$1MM	$1MM-$5MM
<3%	14%	17%	12%
3%	40%	36%	42%
4%–5%	20%	19%	20%
>5%	15%	16%	15%

Re-Enrollment Actions Taken in Past 12–18 Months
	ALL MICRO	<$1MM	$1MM-$5MM
Nonparticipants	4%	4%	5%
Participants saving below default deferral	1%	1%	2%
Participants not in default investment	2%	2%	2%
No attempts to re-enroll any groups	93%	94%	92%

Financial Education Offered by Employers
	ALL MICRO	<$1MM	$1MM-$5MM
Investing basics/strategies	22%	17%	24%
Saving and budgeting	17%	13%	19%
Retiree health care planning	8%	5%	10%
Credit/Debt management	8%	6%	8%
Social Security strategies	7%	6%	8%
Tax/Estate planning	5%	3%	6%
Long-term care	5%	4%	5%
College saving	5%	3%	5%
Home buying	4%	3%	4%

Participation Eligibility
	ALL MICRO	<$1MM	$1MM-$5MM
Immediately upon hire	19%	19%	19%
Within 3 months of hire	24%	23%	24%
Within 4 to 11 months of hire	16%	16%	16%
After 1 year from date of hire	39%	40%	39%
After more than 1 year from date of hire	2%	2%	1%

Matching Contribution Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Yes	67%	63%	69%
No	32%	36%	30%
Unsure/Don’t know	1%	1%	1%

Approximate Maximum Match
	ALL MICRO	<$1MM	$1MM-$5MM
More than 100% of first 6% of salary	3%	6%	2%
100% of first 6% of salary	9%	9%	9%
51%–99% of first 6% of salary	39%	42%	37%
50% of first 6% of salary	13%	10%	15%
Less than 50% of first 6% of salary	6%	6%	6%
Other	30%	27%	31%

Frequency of Matching Contributions
	ALL MICRO	<$1MM	$1MM-$5MM
Annually	14%	13%	15%
Quarterly	2%	2%	2%
Monthly	3%	3%	3%
Twice monthly	4%	5%	3%
Biweekly	6%	8%	5%
Weekly	69%	65%	71%
Other	2%	3%	1%

Participants Maximizing Match
	ALL MICRO	<$1MM	$1MM-$5MM
All or nearly all participants (>90%)	32%	38%	30%
Vast majority (>75%–90%)	23%	21%	24%
More than average (>50%–75%)	19%	13%	22%
Less than average (>25%–50%)	13%	10%	15%
A minority (10%–25%)	5%	7%	5%
Very few (<10%)	7%	11%	5%

“True-Up”* Provision for Matching Contributions
	ALL MICRO	<$1MM	$1MM-$5MM
Yes	16%	14%	17%
No	48%	40%	52%
Unsure/Don’t know	36%	46%	31%
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	33%	39%	30%
6 months	1%	1%	1%
1 year	6%	9%	5%
2 years	2%	3%	2%
3 years	9%	8%	9%
4 years	4%	3%	4%
5 years	23%	19%	25%
>5 years	23%	17%	25%

Participants With Loans Outstanding
	ALL MICRO	<$1MM	$1MM-$5MM
Average	10%	8%	11%
Median	6%	2%	8%

Participants Making Hardship Withdrawals
	ALL MICRO	<$1MM	$1MM-$5MM
Average	1%	1%	1%
Median	0%	0%	0%

Number of Investment Options Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Average	24	25	24
Median	21	20	21

Number of Investment Options Held by Participants
	ALL MICRO	<$1MM	$1MM-$5MM
Average	5	5	5
Median	4	4	4

Types of Investment Options Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Balanced fund(s)	72%	70%	73%
Target-date funds	68%	65%	70%
Money market fund	65%	64%	65%
Target-risk funds	51%	50%	52%
Stable value fund	38%	24%	44%
Participant-managed account service	33%	28%	34%
Real estate/REITs	21%	15%	23%
Socially responsible fund(s)	9%	8%	9%
Alternative investments	5%	5%	4%
Employer stock	1%	1%	1%

Results
	ALL MICRO	<$1MM	$1MM-$5MM
Participation rate (average)	76%	75%	76%
Participation rate (median)	84%	83%	84%
Account balance (average)	$70,453	$53,344	$78,534
Account balance (median)	$50,000	$28,413	$57,155

Income-Oriented Products/Services Offered
	ALL MICRO	<$1MM	$1MM-$5MM
In-plan: guaranteed monthly income**	5%	4%	6%
In-plan: guaranteed minimum benefit***	3%	3%	2%
In-plan: no guarantees	5%	5%	4%
Out-of-plan: annuity purchase	1%	1%	1%
No income-oriented products	50%	46%	52%
Unsure of income product type	39%	43%	38%
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	90%	88%	91%
Separate accounts	18%	17%	19%
Collective investment trusts	6%	5%	7%
ETFs (outside of brokerage windows)	12%	13%	11%
Self-directed brokerage window	8%	8%	9%
Mutual fund window	5%	6%	5%
Other	5%	5%	5%

Frequency of Formal Review of Investment Options
	ALL MICRO	<$1MM	$1MM-$5MM
Quarterly	14%	9%	16%
Twice a year	11%	5%	14%
Annually	48%	47%	49%
Every 1 to 2 years	9%	10%	8%
Every >2 to 3 years	4%	4%	4%
Every >3 years	3%	4%	3%
Never	11%	21%	7%

Approximate Average Expense Ratio of Plan Investments
	ALL MICRO	<$1MM	$1MM-$5MM
<0.25% (<25 bps)	8%	13%	5%
0.25%–0.50% (25–50 bps)	14%	9%	16%
>0.50%–0.75% (51–75 bps)	10%	8%	11%
>0.75%–1.0% (76–100 bps)	10%	8%	11%
>1.0%–1.5% (101–150 bps)	9%	8%	10%
>1.5%–2.0% (151–200 bps)	0%	0%	0%
>2.0%–2.5% (201–250 bps)	0%	0%	1%
>2.5% (>250 bps)	0%	0%	0%
Unsure/Don’t know	47%	53%	44%

Frequency of Formal Review of Administrative Costs/Fees
	ALL MICRO	<$1MM	$1MM-$5MM
Annually	68%	63%	71%
Every 1 to 2 years	12%	12%	12%
Every >2 to 3 years	7%	6%	7%
Every >3 to 5 years	2%	2%	2%
Every >5 years	1%	2%	1%
Unsure/Don’t know	10%	16%	7%

Paying for Plan’s Administrative/Recordkeeping Costs
	ALL MICRO	<$1MM	$1MM-$5MM
Participants – via direct fees	18%	14%	20%
Shared – participants and sponsors	18%	11%	21%
Sponsor/Employer pays directly	48%	61%	43%
None – fees paid by revenue sharing	0%	0%	0%
Unsure/Don’t know	11%	12%	10%

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	21%	15%	23%
Yes, and we plan to externally benchmark our plan’s cost/fees in the near future	4%	3%	4%
Yes, but we did not externally benchmark our plan’s cost/fees	15%	12%	16%
No, but we intend to calculate total fees in the next 6 months	4%	5%	4%
No, but we may do it at some point in the future	30%	36%	28%
Unsure/Don’t know	26%	30%	24%

Length of Relationship With Provider
	ALL MICRO	<$1MM	$1MM-$5MM
Up to 1 year	6%	9%	5%
>1 year to 3 years	15%	19%	13%
>3 years to 5 years	16%	16%	15%
>5 years to 7 years	13%	11%	14%
>7 years	46%	39%	49%
Unsure/Don’t know	3%	4%	3%

Frequency of Formal Review of Providers
	ALL MICRO	<$1MM	$1MM-$5MM
Annually	55%	52%	57%
Every 1 to 2 years	11%	12%	11%
Every >2 to 3 years	8%	7%	9%
Every >3 to 5 years	5%	4%	6%
Every >5 years	4%	4%	4%
Unsure/Don’t know	16%	22%	13%

Investment Committee for the DC Plan
	ALL MICRO	<$1MM	$1MM-$5MM
Internal employees only	21%	12%	25%
External non-employees only	3%	2%	3%
Employees and non-employees	15%	8%	18%
Unsure of composition	2%	2%	2%
No investment committee	50%	63%	44%
Unsure/Don’t know	9%	12%	8%

Number of Responsible Plan Fiduciaries (RPFs) in Plan~
	ALL MICRO	<$1MM	$1MM-$5MM
One person	28%	35%	25%
2 or 3 people	44%	31%	50%
4 or 5 people	5%	3%	6%
More than 5 people	1%	0%	2%
Unsure/Don’t know	21%	31%	17%
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 registered investment adviser.

Investment Advice Offered
	ALL MICRO	<$1MM	$1MM-$5MM
Financial planner/adviser – on-site	42%	31%	47%
Financial planner/adviser – phone-based	21%	15%	23%
Independent third party^	11%	8%	12%
Provider’s proprietary services/tools	22%	18%	24%
Through another source	4%	4%	4%
Total offering advice	71%	61%	76%
No advice offered	29%	39%	24%
Footnote: ^E.g., Financial Engines, Morningstar.

Targeted Education/Communications to Participants About…
	ALL MICRO	<$1MM	$1MM-$5MM
Rolling over past plan balances into current plan	30%	28%	31%
Taking a pre-retirement distribution	16%	14%	17%
Distribution/Rollover options upon separation	35%	29%	37%
Income/Distribution options upon retirement	18%	15%	20%

Level of Agreement (% agree or slightly agree)
	ALL MICRO	<$1MM	$1MM-$5MM
Organization prefers past employees remain in plan	20%	17%	21%
Most employees will achieve retirement goals by 65	26%	33%	24%
DOL’s fiduciary rule will adversely affect plan sponsor service from advisers	20%	17%	21%
DOL's fiduciary rule will adversely affect participant service from advisers	25%	24%	26%

Success Measures Used
	ALL MICRO	<$1MM	$1MM-$5MM
Participation rates	44%	32%	49%
Deferral rates	30%	18%	35%
Participants meeting income replacement goals	3%	1%	3%
Participants saving to match	10%	6%	12%
Participants with “appropriate” asset allocations	4%	3%	4%
Participants increasing deferral rates in past year	4%	3%	5%
Employee satisfaction with plan (through survey)	14%	12%	14%
External/Competitive benchmarking of plan design	11%	6%	13%
We have no formal plan success measures	48%	60%	42%