RESEARCH |
2019
PLANADVISER Micro Plan Survey
Our annual gathering of data on plans with less than $5 million in assets points to a promising market for advisers
Reported by PLANADVISER
| Art by JooHee Yoon
Industry Data
| Top and Bottom 5 Industries for Micro Plans, in Terms of ... |
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|---|---|---|---|---|---|---|---|---|
| Average Participation Rate | ||||||||
| Top | Bottom | |||||||
| 1 | Accounting | 92.7% | 44 | Health care (not for profit) | 62.9% | |||
| 2 | Banking: Commercial | 90.3% | 45 | Govt: County/State/Federal | 61.2% | |||
| 3 | Insurance/Reinsurance | 88.8% | 46 | Transportation/Airlines | 59.5% | |||
| 4 | Financial services | 88.6% | 47 | Education: K–12, preschool | 58.1% | |||
| 5 | Holding co’s/Inv banking | 87.6% | 48 | Restaurants/Food service | 57.5% | |||
| Average Account Balance | ||||||||
| Top | Bottom | |||||||
| 1 | Law firms | $184,592 | 44 | Transportation/Airlines | $38,511 | |||
| 2 | Utilities | $160,925 | 45 | Religious/Social svcs | $37,593 | |||
| 3 | Membership | $124,618 | 46 | Education: Higher ed | $25,981 | |||
| 4 | Accounting | $121,511 | 47 | Restaurants/Food service | $24,439 | |||
| 5 | Financial services | $114,493 | 48 | Automotive: Manufacturing | $23,197 | |||
| Average Deferral Rate | ||||||||
| Top | Bottom | |||||||
| 1 | Chemicals | 8.2% | 44 | Health care (not for profit) | 4.9% | |||
| 2 | Consulting | 8.1% | 45 | Govt: County/State/Federal | 4.8% | |||
| 3 | Engineering | 7.8% | 46 | Transportation/Airlines | 4.6% | |||
| 4 | Financial services | 7.7% | 47 | Utilities | 4.5% | |||
| 5 | Technology | 7.6% | 48 | Automotive: Manufacturing | 4.0% | |||
| Immediate Eligibility | ||||||||
| Top | Bottom | |||||||
| 1 | Education: K–12, preschool | 76.6% | 44 | Hotels/Gaming | 3.5% | |||
| 2 | Religious/Social svcs | 48.0% | 45 | Aerospace/Defense | 0.0% | |||
| 3 | Education: Higher ed | 46.1% | 46 | Pharmaceuticals | 0.0% | |||
| 4 | Oil & gas/Energy | 45.0% | 47 | Restaurants/Food service | 0.0% | |||
| 5 | Govt: County/State/Federal | 41.6% | 48 | Automotive: Manufacturing | 0.0% | |||
| Type(s) of DC Plan(s) Offered | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| 401(k) | 87% | 91% | 92% |
| 403(b) | 11% | 6% | 7% |
| 457 | 11% | 4% | 5% |
| Money purchase | 2% | 1% | 1% |
| Profit sharing | 19% | 14% | 17% |
| ESOP1 | 3% | 0% | 2% |
| Nonqualified deferred compensation (NQDC) | 8% | 1% | 1% |
| SEP2 | 1% | 1% | 1% |
| SIMPLE IRA3 | 1% | 2% | 1% |
| Other | 2% | 2% | 1% |
|
1Employee stock ownership plan. 2Simplified employee pension. 3Savings incentive match plan for employees individual retirement plan. |
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Use of Advisers
Adviser Use Among Plans
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Use a plan adviser | 68% | 52% | 62% |
| Do not use a plan adviser | 25% | 33% | 28% |
| Unsure/Don’t know | 7% | 15% | 11% |
| Services Provided by Plan Advisers | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Review of fund performance | 96% | 88% | 94% |
| Plan investment selection guidance | 93% | 81% | 91% |
| Evaluating/Explaining provider fees | 82% | 69% | 76% |
| Benchmarking plan design | 74% | 50% | 61% |
| Creation/Monitoring of IPS4 | 71% | 51% | 59% |
| Provider selection/due diligence | 70% | 64% | 66% |
| Group participant education | 59% | 61% | 76% |
| Plan compliance with laws and IPS | 57% | 51% | 57% |
| One-on-one participant education | 57% | 62% | 76% |
| Ensuring plan alignment with objectives | 56% | 48% | 61% |
| 4Investment policy statement | |||
| Financial Education Offered by Employers | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Saving strategies/prioritization | 44% | 19% | 28% |
| Financial markets/Investing basics | 36% | 15% | 28% |
| Budgeting | 29% | 13% | 16% |
| Rolling over past balances into the plan | 29% | 14% | 22% |
| Rollover options for separating employees | 27% | 13% | 20% |
| Retirement health care costs/savings options | 26% | 10% | 13% |
| Social Security withdrawal options/strategies | 21% | 8% | 10% |
| Credit/Debt management | 19% | 6% | 8% |
| College saving | 17% | 6% | 9% |
Adviser Fiduciary Status
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| 3(38) fiduciary | 17% | 15% | 15% |
| 3(21) fiduciary | 37% | 15% | 24% |
| Adviser is not a plan fiduciary | 13% | 13% | 17% |
| Unsure/Don’t know | 34% | 58% | 44% |
Does Your Plan Employ a Third Party as a 3(16) Fiduciary?
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes, broad scope5 | 22% | 21% | 22% |
| Yes, limited scope6 | 31% | 23% | 31% |
| No | 38% | 40% | 37% |
| Unsure/Don’t know | 9% | 17% | 11% |
|
5The third party has broad-scope acceptance of the administrator role, including to be named as the plan administrator in the plan document. 6The third party has only limited-scope acceptance of some (vs. all) of the functions of the plan administrator; responsibility for actions outside of this scope is retained by plan officials. |
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Plan Design
| Plan Design Elements | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Automatic enrollment | 46% | 19% | 24% |
| Automatic escalation | 38% | 13% | 17% |
| Investment policy statement | 69% | 35% | 49% |
| Loan provision | 92% | 84% | 89% |
| Safe harbor | 54% | 72% | 66% |
| Roth feature | 72% | 59% | 69% |
| Fee equalization policy | 32% | 17% | 18% |
Participation Eligibility
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Immediately upon hire | 37% | 22% | 20% |
| Within 3 months of hire | 28% | 21% | 26% |
| Within 4 - 11 months of hire | 13% | 18% | 17% |
| After 1 year from date of hire | 21% | 38% | 35% |
| After >1 year from date of hire | 1% | 2% | 2% |
Automatic Features
Auto-Enrollment Default Deferral Rate
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| <3% | 11% | 20% | 12% |
| 3% | 39% | 45% | 42% |
| >3% – 5% | 24% | 20% | 20% |
| >5% | 26% | 16% | 27% |
Re-Enrollment Actions Taken in Past 12 – 18 Months
| All Plans | <$1MM | $1MM–$5MM | ||
|---|---|---|---|---|
| Re-enrolled employees not participating in the plan (requiring them to opt out again or else be enrolled) | 18% | 12% | 13% | |
| Re-enrolled participants saving below the default deferral rate (thus boosting their deferral rate) | 11% | 5% | 4% | |
| Re-enrolled participants not invested in the default investment (meaning current/ future contributions go into the plan default investment) | 3% | 2% | 1% | |
| We have not re-enrolled any employees/ participants | 78% | 82% | 85% | |
Investments
| Investment Committee for the DC Plan | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Internal employees only | 42% | 19% | 24% |
| External non-employees only | 2% | 2% | 3% |
| Employees and non-employees | 29% | 11% | 21% |
| Unsure of composition | 1% | 1% | 1% |
| No investment committee | 22% | 57% | 44% |
| Unsure/Don’t know | 4% | 11% | 7% |
| Income-Oriented Products/Services Offered | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| At retirement: Systematic withdrawal option | 44% | 27% | 33% |
| In-plan: Guaranteed monthly income | 10% | 7% | 10% |
| In-plan: Professional managed account service | 27% | 14% | 22% |
| In-plan: No guarantees | 10% | 10% | 10% |
| Out-of-plan: Annuity purchase | 5% | 4% | 3% |
| No income-oriented products | 46% | 64% | 57% |
Frequency of Formal Review of Investment Options
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Quarterly | 40% | 15% | 17% |
| Twice a year | 14% | 8% | 12% |
| Annually | 34% | 42% | 51% |
| Every 1 to 2 years | 4% | 9% | 7% |
| Every 2 to 3 years | 2% | 4% | 3% |
| Every >3 years | 2% | 4% | 3% |
| Never | 4% | 16% | 7% |
| Types of Investment Options Offered | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Target-date funds | 81% | 68% | 79% |
| Target-risk funds7 | 40% | 50% | 49% |
| Balanced fund(s) | 69% | 63% | 72% |
| Professionally managed account service | 33% | 32% | 31% |
| Money market fund | 60% | 61% | 63% |
| Employer stock | 6% | 1% | 1% |
| Stable value fund | 59% | 32% | 38% |
| Real estate/REITs8 | 27% | 20% | 22% |
| Alternative investments9 | 5% | 5% | 6% |
| Socially responsible fund(s) | 8% | 7% | 6% |
|
7E.g., growth, conservative. 8Real estate investment trusts. 9E.g., hedge funds, private equity. |
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| Investment Vehicles Used in DC Plan | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Mutual funds | 94% | 91% | 91% |
| Separate accounts | 19% | 19% | 18% |
| Collective investment trusts | 17% | 8% | 9% |
| ETFs10 (outside of brokerage windows) | 2% | 2% | 3% |
| Self-directed brokerage window | 20% | 13% | 12% |
| Mutual fund window | 5% | 6% | 6% |
| Other | 1% | 2% | 1% |
| 10Exchange-traded funds | |||
Number of Investment Options Offered
All Plans
24.9
Average
<$1mm
24.3
Average
$1mm – $5mm
25.0
Average
All Plans
22.0
Median
<$1mm
22.0
Median
$1mm – $5mm
22.0
Median
Number of Investment Options Held by Participants
All Plans
5.5
Average
<$1mm
5.4
Average
$1mm – $5mm
5.8
Average
All Plans
4.0
Median
<$1mm
4.0
Median
$1mm – $5mm
4.2
Median
Company Match
Matching Contribution Offered
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes | 76% | 66% | 73% |
| No | 23% | 33% | 27% |
| Unsure/Don’t know | 0% | 1% | 1% |
‘True-Up’11 Provision for Matching Contributions
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes | 38% | 24% | 24% |
| No | 42% | 36% | 42% |
| Unsure/Don’t know | 20% | 40% | 34% |
|
11A 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 Plans | <$1MM | $1MM–$5MM | |
| All or nearly all participants (>90%) | 26% | 40% | 34% |
| Vast majority (>75% – 90%) | 27% | 18% | 21% |
| More than average (>50% – 75%) | 23% | 14% | 19% |
| Less than average (>25% – 50%) | 12% | 6% | 12% |
| A minority (10% – 25%) | 4% | 8% | 5% |
| Very few (<10%) | 3% | 4% | 5% |
| Unsure/Don’t know | 5% | 9% | 4% |
Frequency of Matching Contributions
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Annually | 14% | 13% | 15% |
| Quarterly | 3% | 0% | 2% |
| Monthly (non-pay-period) | 2% | 6% | 3% |
| Twice monthly (non-pay-period) | 1% | 1% | 2% |
| Biweekly (non-pay-period) | 3% | 2% | 3% |
| Per pay period | 77% | 75% | 75% |
| Other | 1% | 1% | 1% |
When Participants Are 100% Vested
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Immediately on enrollment | 36% | 39% | 35% |
| After ≤1 year from hire date | 4% | 7% | 4% |
| After 2 years from hire date | 5% | 2% | 2% |
| After 3 years from hire date | 13% | 4% | 8% |
| After 4 years from hire date | 5% | 3% | 4% |
| After 5 years from hire date | 19% | 20% | 22% |
| After 6 years from hire date | 16% | 15% | 20% |
| After >6 years from hire date | 1% | 3% | 2% |
Approximate Maximum Match
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| >100% of first 6% of salary | 8% | 9% | 8% |
| 100% of first 6% of salary | 15% | 16% | 15% |
| 51% – 99% of first 6% of salary | 31% | 36% | 33% |
| 50% of first 6% of salary | 22% | 15% | 21% |
| >50% of first 6% of salary | 15% | 14% | 13% |
| Other | 9% | 11% | 10% |
DC Providers
Length of Relationship With Provider
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| >1 year | 4% | 5% | 3% |
| 1 year to 3 years | 13% | 21% | 17% |
| >3 years to 5 years | 14% | 20% | 19% |
| >5 years to 7 years | 12% | 11% | 13% |
| >7 years | 54% | 33% | 42% |
| Unsure/Don’t know | 3% | 9% | 5% |
| Frequency of Formal Review of Providers | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Annually | 62% | 58% | 63% |
| Every 1 to 2 years | 10% | 10% | 11% |
| Every >2 to 3 years | 9% | 7% | 6% |
| Every >3 to 5 years | 7% | 4% | 4% |
| Every >5 years | 3% | 3% | 2% |
| Unsure/Don’t know | 9% | 19% | 15% |
Costs/Fees
Who Pays for Plan’s Administrative/Recordkeeping Costs?
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Plan (via participants) | 47% | 18% | 30% |
| Employer | 31% | 56% | 45% |
| Both | 14% | 11% | 14% |
| Unsure/Don’t know | 7% | 14% | 11% |
| Approximate Average Expense Ratio of Plan Investments | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| >0.25% (>25 bps12) | 16% | 15% | 12% |
| 0.25% – 0.50% (25 – 50 bps) | 26% | 13% | 17% |
| >0.50% – 0.75% (51– 75 bps) | 15% | 7% | 10% |
| >0.75% –1.0% (76 –100 bps) | 9% | 7% | 10% |
| >1.0% – 2.0% (101– 200 bps) | 5% | 5% | 9% |
| >2.0% – 2.5% (201 – 250 bps) | 0% | 0% | 0% |
| >2.5% (>250 bps) | 0% | 1% | 1% |
| Unsure/Don’t know | 29% | 52% | 41% |
| 12Basis points | |||
Frequency of Formal Review of Administrative Costs/Fees
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Annually | 74% | 70% | 73% |
| Every 1 to 2 years | 9% | 8% | 10% |
| Every >2 to 3 years | 6% | 4% | 5% |
| Every >3 to 5 years | 3% | 3% | 2% |
| Every >5 years | 1% | 1% | 1% |
| Unsure/Don’t know | 6% | 15% | 9% |
Were Total Plan Fees Calculated for the Prior Plan Year?
| All Plans | <$1MM | $1MM–$5MM | ||
|---|---|---|---|---|
| Yes, and we externally benchmarked our plan’s cost/fees as part of the process | 46% | 25% | 29% | |
| Yes, and we plan to externally benchmark our plan’s cost/fees in the near future | 7% | 1% | 5% | |
| Yes, but we did not externally benchmark our plan’s cost/fees | 17% | 17% | 21% | |
| No, but we intend to calculate total fees in the next 6 months | 4% | 8% | 5% | |
| No, but we may do it at some point in the future | 12% | 26% | 20% | |
| Unsure/Don’t know | 14% | 23% | 20% | |
Results
Participation Rate (Average)
Participation Rate (Median)
Account Balance (Average)
Account Balance (Median)
| Participants Making Hardship Withdrawals | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Average | 1% | 1% | 1% |
| Median | 0% | 0% | 0% |
| Participants With Loans Outstanding | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Average | 13% | 12% | 12% |
| Median | 11% | 10% | 10% |
| Success Measures Used | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Participation rates | 72% | 45% | 58% |
| Deferral rates | 58% | 27% | 39% |
| External benchmarking of plan design | 26% | 5% | 16% |
| Participants saving to match | 23% | 10% | 14% |
| Employee satisfaction with plan (survey) | 17% | 12% | 16% |
| Participant assets allocated “appropriately” | 14% | 2% | 6% |
| Participants using advice tools/seminars offered | 12% | 2% | 4% |
| Participants increasing deferral rates in past year | 11% | 2% | 7% |
| Participants meeting income replacement goals | 9% | 3% | 3% |
| We have no formal plan success measures | 21% | 48% | 34% |