RESEARCH |
2018
PLANADVISER Micro Plan Survey
Reported by PLANADVISER
| Art by Claire Merchlinsky
Industry Data
| Type(s) of DC Plan(s) Offered | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| 401(k) | 92% | 89% | 93% |
| 403(b) | 5% | 7% | 4% |
| 457 | 4% | 4% | 3% |
| Money purchase | 1% | 1% | 1% |
| Profit sharing | 18% | 16% | 19% |
| ESOP1 | 1% | 0% | 1% |
| Nonqualified deferred compensation (NQDC) | 1% | 1% | 2% |
| SEP2 | 0% | 1% | 0% |
| SIMPLE IRA3 | 1% | 1% | 1% |
| Other | 2% | 2% | 3% |
|
1Employee stock ownership plan; 2Simplified employee pension; 3Savings incentive match plan for employees individual retirement plan. |
|||
Use of Advisers
Adviser Use Among Plans
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes | 69% | 62% | 72% |
| No | 31% | 38% | 28% |
| Common Adviser Services | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Review of fund performance | 91% | 87% | 92% |
| Plan investment selection guidance | 87% | 87% | 87% |
| Evaluating/Explaining provider fees | 71% | 63% | 73% |
| Group participant education | 70% | 71% | 69% |
| One-on-one participant education | 69% | 71% | 69% |
| Provider selection/due diligence | 61% | 60% | 61% |
| Benchmarking plan design | 54% | 48% | 55% |
| Plan compliance with laws and IPS4 | 52% | 45% | 54% |
| Creation/Monitoring of IPS | 52% | 44% | 53% |
| 4Investment policy statement | |||
| Financial Education Offered by Employers | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Saving strategies/prioritization | 23% | 19% | 25% |
| Financial markets/Investing basics | 20% | 16% | 21% |
| Rolling over past balances into the plan | 19% | 13% | 22% |
| Rollover options for separating employees | 17% | 11% | 19% |
| Budgeting | 14% | 12% | 14% |
| Retirement health care costs/savings options | 11% | 11% | 11% |
| Social Security withdrawal options/strategies | 10% | 9% | 10% |
| Credit/Debt management | 9% | 9% | 8% |
| College saving | 8% | 8% | 7% |
Adviser Fiduciary Status
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes – 3(38) fiduciary | 17% | 11% | 19% |
| Yes – 3(21) fiduciary | 20% | 17% | 21% |
| No | 15% | 13% | 16% |
| Unsure/Don’t know | 48% | 59% | 44% |
Does Your Plan Employ a Third Party5 as a 3(16) Fiduciary?
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes, broad scope | 21% | 19% | 22% |
| Yes, limited scope | 30% | 24% | 32% |
| No | 34% | 37% | 33% |
| Unsure/Don’t know | 15% | 21% | 13% |
| 5Third-party administrator (TPA), recordkeeper, adviser, etc. | |||
Plan Design
| Plan Design Elements | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Automatic enrollment | 20% | 16% | 21% |
| Automatic escalation | 13% | 12% | 14% |
| Investment policy statement | 42% | 29% | 48% |
| Loan provision | 73% | 67% | 75% |
| Safe harbor | 66% | 75% | 63% |
| Roth feature | 62% | 58% | 63% |
| Fee equalization policy | 15% | 17% | 14% |
Participation Eligibility
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Immediately upon hire | 20% | 23% | 18% |
| Within 3 months of hire | 22% | 17% | 24% |
| Within 4 to 11 months of hire | 16% | 12% | 18% |
| After 1 year from date of hire | 40% | 44% | 38% |
| After >1 year from date of hire | 2% | 3% | 2% |
Automatic Features
Auto-Enrollment Default Deferral Rate
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| <3% | 16% | 17% | 16% |
| 3% | 45% | 45% | 45% |
| >3% – 5% | 15% | 15% | 15% |
| >5% | 12% | 4% | 14% |
Re-Enrollment Actions Taken in Past 12 – 18 Months
| All Micro | <$1MM | $1MM–$5MM | ||
|---|---|---|---|---|
| Re-enrolled employees not participating in the plan (requiring them to opt out again or else be enrolled) | 14% | 13% | 14% | |
| Re-enrolled participants saving below the default deferral rate (thus boosting their deferral rate) | 5% | 6% | 5% | |
| Re-enrolled participants not invested in the default investment (meaning current/ future contributions are invested in the plan default) | 4% | 4% | 4% | |
| We have not re-enrolled any employees/ participants | 83% | 83% | 83% | |
Investments
| Investment Committee for the DC Plan | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Internal employees only | 22% | 19% | 23% |
| External non-employees only | 3% | 1% | 3% |
| Employees and non-employees | 18% | 8% | 22% |
| Unsure of composition | 1% | 1% | 1% |
| No investment committee | 49% | 59% | 46% |
| Unsure/Don’t know | 7% | 12% | 5% |
| Income-Oriented Products/Services Offered | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Systematic withdrawal option at retirement | 19% | 15% | 20% |
| In-plan – guaranteed monthly income | 5% | 6% | 5% |
| In-plan – professional managed account service | 10% | 10% | 10% |
| In-plan – no guarantees | 4% | 4% | 4% |
| Out-of-plan – annuity purchase | 2% | 3% | 2% |
| Unsure of income product type | 30% | 28% | 30% |
| No income-oriented products | 45% | 49% | 44% |
Frequency of Formal Review of Investment Options
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Quarterly | 15% | 12% | 16% |
| Twice a year | 11% | 7% | 12% |
| Annually | 51% | 49% | 52% |
| Every 1 to 2 years | 6% | 5% | 6% |
| Every 2 to 3 years | 3% | 4% | 3% |
| Every >3 years | 3% | 4% | 3% |
| Never | 10% | 19% | 7% |
| Types of Investment Options Offered | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Balanced fund(s) | 70% | 61% | 73% |
| Target-date funds | 70% | 58% | 73% |
| Money market fund | 61% | 55% | 63% |
| Target-risk funds6 | 52% | 53% | 52% |
| Stable value fund | 35% | 24% | 39% |
| Professionally managed account service | 32% | 29% | 32% |
| Real estate/REITs7 | 23% | 18% | 25% |
| Socially responsible fund(s) | 10% | 10% | 10% |
| Alternative investments8 | 6% | 6% | 6% |
| Employer stock | 1% | 2% | 1% |
|
6E.g., growth, conservative. 7Real estate investment trusts. 8E.g., hedge funds, private equity. |
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| Investment Vehicles Used in DC Plan | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Mutual funds | 89% | 86% | 90% |
| Separate accounts | 20% | 17% | 21% |
| Collective investment trusts | 7% | 6% | 8% |
| ETFs9 (outside of brokerage windows) | 16% | 12% | 17% |
| Self-directed brokerage window | 10% | 10% | 10% |
| Mutual fund window | 5% | 5% | 5% |
| Other | 6% | 6% | 6% |
| 9Exchange-traded funds | |||
Number of Investment Options Offered
All Micro
24.5
Average
<$1mm
21.8
Average
$1mm – $5mm
25.3
Average
All Micro
21.0
Median
<$1mm
20.0
Median
$1mm – $5mm
22.0
Median
Number of Investment Options Held by Participants
All Micro
6.5
Average
<$1mm
6.5
Average
$1mm – $5mm
6.4
Average
All Micro
5.0
Median
<$1mm
4.0
Median
$1mm – $5mm
5.0
Median
Company Match
Matching Contribution Offered
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes | 68% | 63% | 70% |
| No | 30% | 34% | 29% |
| Unsure/Don’t know | 2% | 3% | 1% |
‘True-Up’10 Provision for Matching Contributions
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes | 21% | 20% | 21% |
| No | 46% | 30% | 51% |
| Unsure/Don’t know | 33% | 47% | 28% |
|
10A true-up match may be used to restore matching contributions “lost” when an employee reaches the annual contribution limit prior to year-end. |
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| Participants Maximizing Match | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| All or nearly all participants (>90%) | 32% | 37% | 31% |
| Vast majority (>75% – 90%) | 22% | 20% | 23% |
| More than average (>50% – 75%) | 16% | 15% | 17% |
| Less than average (>25% – 50%) | 14% | 11% | 15% |
| A minority (10% – 25%) | 6% | 6% | 6% |
| Very few (<10%) | 8% | 10% | 7% |
Frequency of Matching Contributions
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Annually | 16% | 17% | 16% |
| Quarterly | 2% | 3% | 2% |
| Monthly (non-pay-period) | 4% | 5% | 3% |
| Twice monthly (non-pay-period) | 4% | 3% | 4% |
| Biweekly (non-pay-period) | 5% | 4% | 5% |
| Per pay period | 68% | 66% | 68% |
| Other | 2% | 3% | 2% |
When Participants Are 100% Vested
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Immediately on enrollment | 38% | 49% | 35% |
| After ≤1 year | 4% | 5% | 3% |
| After 2 years | 2% | 2% | 2% |
| After 3 years | 8% | 6% | 8% |
| After 4 years | 3% | 3% | 3% |
| After 5 years | 22% | 16% | 24% |
| After >5 years | 23% | 20% | 24% |
Approximate Maximum Match
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| >100% of first 6% of salary | 7% | 9% | 8% |
| 100% of first 6% of salary | 13% | 11% | 11% |
| 51% – 99% of first 6% of salary | 34% | 38% | 33% |
| 50% of first 6% of salary | 21% | 17% | 22% |
| >50% of first 6% of salary | 19% | 18% | 19% |
| Other | 7% | 7% | 7% |
DC Providers
Length of Relationship With Provider
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| >1 year | 3% | 5% | 2% |
| 1 year to 3 years | 17% | 20% | 16% |
| >3 years to 5 years | 18% | 16% | 19% |
| >5 years to 7 years | 14% | 16% | 13% |
| >7 years | 44% | 37% | 46% |
| Unsure/Don’t know | 4% | 7% | 3% |
| Frequency of Formal Review of Providers | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Annually | 66% | 60% | 68% |
| Every 1 to 2 years | 10% | 10% | 10% |
| Every >2 to 3 years | 6% | 5% | 6% |
| Every >3 to 5 years | 2% | 1% | 3% |
| Every >5 years | 2% | 3% | 2% |
| Unsure/Don’t know | 14% | 21% | 11% |
Costs/Fees
Who Pays for Plan’s Administrative/Recordkeeping Costs
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Plan (via participants) | 27% | 20% | 30% |
| Employer | 48% | 55% | 46% |
| Both | 12% | 9% | 14% |
| Unsure/Don’t know | 12% | 17% | 10% |
| Approximate Average Expense Ratio of Plan Investments | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| >0.25% (>25 bps) | 10% | 15% | 8% |
| 0.25% – 0.50% (25 – 50 bps) | 16% | 15% | 16% |
| >0.50% – 0.75% (51– 75 bps) | 9% | 9% | 9% |
| >0.75% –1.0% (76 –100 bps) | 10% | 4% | 13% |
| >1.0% – 2.0% (101– 200 bps) | 9% | 6% | 11% |
| >2.0% – 2.5% (20 – 250 bps) | 0% | 1% | 0% |
| >2.5% (>250 bps) | 1% | 0% | 1% |
| Unsure/Don’t know | 44% | 51% | 42% |
Frequency of Formal Review of Administrative Costs/Fees
| All Micro | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Annually | 76% | 72% | 77% |
| Every 1 to 2 years | 10% | 8% | 10% |
| Every 2 to 3 years | 4% | 3% | 4% |
| Every 4 to 5 years | 1% | 1% | 1% |
| Every >5 years | 1% | 1% | 0% |
| Unsure/Don’t know | 9% | 15% | 7% |
Were 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 |
32% | 23% | 35% | |
| Yes, and we plan to externally benchmark our plan’s cost/fees in the near future |
5% | 5% | 5% | |
| Yes, but we did not externally benchmark our plan’s cost/fees |
16% | 12% | 18% | |
| No, but we intend to calculate total fees in the next 6 months |
5% | 6% | 4% | |
| No, but we may do it at some point in the future |
22% | 28% | 20% | |
| Unsure/Don’t know | 20% | 26% | 18% | |
Results
Participation Rate (Average)
Participation Rate (Median)
Account Balance (Average)
Account Balance (Median)
| Participants Making Hardship Withdrawals | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Average | 1% | 1% | 1% |
| Median | 0% | 0% | 0% |
| Participants With Loans Outstanding | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Average | 10% | 8% | 10% |
| Median | 6% | 1% | 8% |
| Success Measures Used | |||
|---|---|---|---|
| All Micro | <$1MM | $1MM–$5MM | |
| Participation rates | 47% | 33% | 51% |
| Deferral rates | 30% | 24% | 32% |
| Employee satisfaction with plan (survey) | 13% | 10% | 15% |
| External benchmarking of plan design | 12% | 7% | 14% |
| Participants saving to match | 9% | 4% | 10% |
| Participants increasing deferral rates in past year | 4% | 2% | 4% |
| Participants using advice tools/seminars offered | 3% | 2% | 4% |
| Participants meeting projected monthly goals | 3% | 4% | 3% |
| We have no formal plan success measures | 43% | 57% | 38% |