RESEARCH |
2020
PLANADVISER Micro Plan Survey
Micro plans have much to gain from adviser help with fiduciary matters
Reported by PLANADVISER
Industry Data
| Top and Bottom 5 Industries for Micro Plans1, in Terms of ... |
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|---|---|---|---|---|---|---|---|---|
| Average Participation Rate | ||||||||
| Top | Bottom | |||||||
| 1 | Govt: City/Municipal | 100.0% | 44 | Education: K-12, Preschool | 59.8% | |||
| 2 | Insurance/Reinsurance | 93.2% | 45 | Transportation/Airlines | 59.3% | |||
| 3 | Utilities | 92.5% | 46 | Automotive: Manufacturing | 58.5% | |||
| 4 | Fortune 1000 | 85.8% | 47 | Restaurants/Food Service | 58.4% | |||
| 5 | Research/Development | 85.7% | 48 | Auto: Dealerships/Service | 50.9% | |||
| Average Account Balance | ||||||||
| Top | Bottom | |||||||
| 1 | Utilities | $170,322 | 44 | Non-Profit Orgs | $45,015 | |||
| 2 | Law Firms | $138,364 | 45 | Telecommunications | $39,988 | |||
| 3 | Financial Services | $122,575 | 46 | Religious/Social Services | $38,830 | |||
| 4 | Insurance/Reinsurance | $115,256 | 47 | Auto: Manufacturing | $29,795 | |||
| 5 | Consulting | $115,103 | 48 | Restaurants/Food Service | $28,543 | |||
| Average Deferral Rate | ||||||||
| Top | Bottom | |||||||
| 1 | Chemicals/Mining | 10.3% | 44 | Telecommunications | 5.3% | |||
| 2 | Membership | 9.2% | 45 | Equipment Sales | 5.0% | |||
| 3 | Utilities | 9.1% | 46 | Holding Co's/Inv Banking | 5.0% | |||
| 4 | Law Firms | 8.6% | 47 | Auto: Dealerships/Service | 4.8% | |||
| 5 | Education: Higher Ed | 8.5% | 48 | Agriculture | 4.1% | |||
| Immediate Eligibility | ||||||||
| Top | Bottom | |||||||
| 1 | Healthcare (not for profit) | 70.5% | 44 | Hotels/Gaming | 4.1% | |||
| 2 | Education: K-12, Preschool | 60.8% | 45 | Membership | 4.0% | |||
| 3 | Religious/Social Services | 56.2% | 46 | Manufacturing: Consumer | 2.6% | |||
| 4 | Education: Higher Ed | 50.0% | 47 | Restaurants/Food service | 0.0% | |||
| 5 | Govt: County/State/Federal | 50.0% | 48 | Agriculture | 0.0% | |||
| 1Rankings are limited to those industries that met established quotas. | ||||||||
Survey Profile
| Type(s) of DC Plan(s) Offered | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| 401(k) | 88% | 91% | 93% |
| Profit sharing | 18% | 12% | 16% |
| 403(b) | 11% | 6% | 7% |
| 457 | 10% | 5% | 5% |
| Nonqualified deferred compensation (NQDC) | 10% | 1% | 2% |
| ESOP2/KSOP3 | 3% | 0% | 1% |
| Money purchase | 2% | 1% | 2% |
| SIMPLE4 IRA | 1% | 2% | 1% |
| SEP5 | 0% | 1% | 0% |
| Other | 3% | 2% | 2% |
|
2Employee stock ownership plan. 3A combination ESOP and 401(k)plan. 4Savings incentive match plan for employees individual retirement plan. 5Simplified employee pension. |
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Use of Advisers
Adviser Use Among Plans
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Use a plan adviser | 70% | 50% | 63% |
| Do not use a plan adviser | 22% | 31% | 25% |
| Unsure/Don’t know | 8% | 19% | 13% |
| Use of Services Provided by Plan Advisers | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Review of fund performance | 93% | 83% | 90% |
| Plan investment selection guidance | 82% | 63% | 76% |
| Evaluating/Explaining provider fees | 77% | 56% | 67% |
| Presenting to plan committees | 72% | 34% | 57% |
| Creation/Monitoring of IPS6 | 65% | 44% | 51% |
| Benchmarking plan design | 61% | 44% | 51% |
| One-on-one participant education | 61% | 63% | 80% |
| Provider selection/due diligence | 60% | 42% | 53% |
| Group participant education | 58% | 52% | 76% |
| Ensuring plan alignment with objectives | 52% | 46% | 58% |
| Plan compliance with laws and IPS | 47% | 40% | 43% |
| Developing/Delivering fiduciary training | 35% | 18% | 28% |
| Technical help with corporate transactions | 31% | 24% | 33% |
| 6Investment policy statement | |||
| Financial Education Offered by Employers | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Saving strategies/prioritization | 48% | 22% | 32% |
| Financial markets/Investing basics | 42% | 22% | 29% |
| Budgeting | 40% | 19% | 25% |
| Rolling over past balances into the plan | 36% | 20% | 29% |
| Rollover options for separating employees | 32% | 15% | 26% |
| Retirement health care costs/savings options | 29% | 13% | 19% |
| Social Security withdrawal options/strategies | 26% | 10% | 15% |
| Credit/Debt management | 25% | 11% | 14% |
| College saving | 23% | 12% | 13% |
| Tax/Estate planning | 23% | 11% | 13% |
| Student Loans | 15% | 3% | 7% |
| Home buying | 14% | 6% | 8% |
Adviser Fiduciary Status
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| 3(21) fiduciary | 40% | 21% | 25% |
| 3(38) fiduciary | 19% | 19% | 18% |
| Adviser is not a plan fiduciary | 10% | 13% | 13% |
| Have both a 3(21) and a 3(38) adviser | 2% | 1% | 2% |
| Unsure/Don’t know | 29% | 45% | 41% |
Does Your Plan Employ a Third Party as a 3(16) Fiduciary?
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes, limited scope7 | 34% | 29% | 31% |
| Yes, broad scope8 | 23% | 19% | 24% |
| No | 34% | 28% | 32% |
| Unsure/Don’t know | 9% | 24% | 12% |
|
7The 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. 8The third party has broad-scope acceptance of the administrator role, including to be named as the plan administrator in the plan document. |
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Plan Design
| Plan Design Elements | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Loan provision | 82% | 69% | 75% |
| Roth feature | 77% | 63% | 72% |
| Investment policy statement | 70% | 44% | 52% |
| Safe harbor | 56% | 69% | 68% |
| Automatic enrollment | 48% | 26% | 26% |
| Fee equalization policy | 42% | 22% | 31% |
| Automatic escalation | 40% | 13% | 18% |
Participation Eligibility
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Immediately upon hire | 37% | 20% | 20% |
| Within 3 months of hire | 31% | 21% | 24% |
| Within 4 - 11 months of hire | 12% | 17% | 17% |
| At 1 year from date of hire | 19% | 38% | 37% |
| After >1 year from date of hire | 1% | 2% | 2% |
Automatic Features
Auto-Enrollment Default Deferral Rate
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| <3% | 10% | 9% | 13% |
| 3% | 40% | 36% | 47% |
| >3% – 5% | 24% | 32% | 17% |
| >5% | 23% | 19% | 15% |
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) | 19% | 13% | 13% | |
| Re-enrolled participants saving below the default deferral rate (thus boosting their deferral rate) | 11% | 6% | 5% | |
| Re-enrolled participants not invested in the default investment (meaning current/ future contributions go into the plan default investment) | 5% | 3% | 7% | |
| We have not re-enrolled any employees/ participants | 75% | 81% | 79% | |
Investments
| Composition of Investment Committee for the DC Plan | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Internal employees only | 43% | 16% | 25% |
| Employees and non-employees | 31% | 10% | 21% |
| No investment committee | 18% | 54% | 41% |
| Unsure/Don’t know | 4% | 16% | 8% |
| External non-employees only | 3% | 4% | 4% |
| Unsure of composition | 1% | 1% | 2% |
| Income-Oriented Products/Services Offered | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| At retirement: Systematic withdrawal option | 44% | 28% | 29% |
| In-plan: Professional managed account service | 24% | 13% | 18% |
| In-plan: No guarantees | 10% | 10% | 9% |
| In-plan: Guaranteed monthly income | 9% | 9% | 8% |
| Out-of-plan: Annuity purchase | 5% | 4% | 3% |
| No income-oriented products | 48% | 65% | 63% |
Frequency of Formal Review of Investment Options
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Quarterly | 41% | 19% | 20% |
| Twice a year | 16% | 5% | 14% |
| Annually | 30% | 42% | 43% |
| Every 1 to 2 years | 3% | 4% | 4% |
| Every >2 years | 3% | 3% | 4% |
| Unsure/Don't know | 8% | 28% | 16% |
| Types of Investment Options Offered | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Target-date funds | 81% | 59% | 76% |
| Balanced fund(s) | 66% | 53% | 68% |
| Money market fund | 57% | 43% | 57% |
| Stable value fund | 57% | 24% | 37% |
| Target-risk funds–e.g., growth, conservative. | 41% | 39% | 52% |
| Professionally managed account service | 31% | 20% | 27% |
| Real estate/REITs9 | 27% | 14% | 21% |
| Environmental, Social, and Governance (ESG) | 11% | 6% | 9% |
| Sector Funds | 11% | 8% | 10% |
| Commodity Funds (i.e., gold/precious metals, oil) | 7% | 3% | 6% |
| Employer stock | 6% | 1% | 1% |
| Alternative investments–e.g., hedge funds, private equity. | 5% | 6% | 5% |
|
9Real estate investment trusts. |
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| Investment Vehicles Used in DC Plan | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Mutual funds | 93% | 87% | 90% |
| Self-directed brokerage window | 23% | 16% | 14% |
| Separate accounts | 20% | 20% | 20% |
| Collective investment trusts | 19% | 15% | 9% |
| ETFs10 (outside of brokerage windows) | 10% | 11% | 13% |
| Mutual fund window | 5% | 6% | 6% |
| 10Exchange-traded funds | |||
Number of Investment Options Offered
All Plans
22.9
Average
<$1mm
20.8
Average
$1mm – $5mm
25.3
Average
All Plans
21.0
Median
<$1mm
20.5
Median
$1mm – $5mm
24.0
Median
Number of Investment Options Held by Participants
All Plans
6.3
Average
<$1mm
6.0
Average
$1mm – $5mm
7.3
Average
All Plans
4.0
Median
<$1mm
3.0
Median
$1mm – $5mm
5.0
Median
Company Match
A Matching Contribution Offered?
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes | 75% | 67% | 71% |
| No | 24% | 30% | 28% |
| Unsure/Don’t know | 1% | 3% | 2% |
A ‘True-Up’11 Provision for Matching Contributions
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Yes | 40% | 19% | 23% |
| No | 42% | 40% | 43% |
| Unsure/Don’t know | 18% | 41% | 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. | |||
| Participants Maximizing Match | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| All or nearly all participants (>90%) | 26% | 36% | 30% |
| Vast majority (>75% – 90%) | 27% | 19% | 22% |
| More than average (>50% – 75%) | 21% | 10% | 16% |
| Less than average (>25% – 50%) | 12% | 11% | 13% |
| A small minority (10% – 25%) | 5% | 9% | 5% |
| Very few (<10%) | 4% | 7% | 6% |
| Unsure/Don’t know | 6% | 8% | 7% |
Frequency of Matching Contributions
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Annually | 14% | 14% | 15% |
| Quarterly | 2% | 1% | 1% |
| Monthly – Non-pay-period | 2% | 6% | 2% |
| Twice monthly – Non-pay-period | 1% | 2% | 1% |
| Biweekly – Non-pay-period | 2% | 5% | 2% |
| Per pay period | 79% | 73% | 79% |
| Other | 1% | 0% | 1% |
Approximate Maximum Match
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| >100% of first 6% of salary | 5% | 6% | 4% |
| 100% of first 6% of salary | 15% | 14% | 13% |
| 51% – 99% of first 6% of salary | 35% | 34% | 37% |
| 50% of first 6% of salary | 22% | 19% | 22% |
| >50% of first 6% of salary | 18% | 20% | 18% |
| Other | 6% | 9% | 6% |
How Long Before Participants Are 100% Vested?
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Immediately on enrollment | 37% | 42% | 35% |
| 1 year or less | 6% | 10% | 6% |
| 2 years | 6% | 3% | 4% |
| 3 years | 13% | 6% | 10% |
| 4 years | 4% | 4% | 3% |
| 5 years | 17% | 12% | 20% |
| 6 or more years | 17% | 15% | 22% |
| Unsure/Don't know | 1% | 8% | 2% |
DC Providers
Length of Relationship With Plan Recordkeeper
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| <1 year | 3% | 6% | 2% |
| 1 year to 3 years | 14% | 23% | 18% |
| >3 years to 5 years | 15% | 17% | 18% |
| >5 years to 7 years | 12% | 12% | 14% |
| >7 years | 56% | 41% | 48% |
| Unsure/Don’t know | 0% | 2% | 0% |
| Frequency of Formal Review of Providers | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Annually | 64% | 56% | 69% |
| Every 1 to 2 years | 9% | 9% | 7% |
| Every >2 to 3 years | 9% | 6% | 5% |
| Every >3 to 5 years | 6% | 3% | 4% |
| Every >5 years | 2% | 2% | 1% |
| Unsure/Don’t know | 10% | 25% | 14% |
Costs/Fees
Who Pays for Plan’s Administrative/Recordkeeping Costs?
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Plan, via participants | 48% | 17% | 29% |
| Employer | 31% | 51% | 45% |
| Both | 13% | 15% | 13% |
| Unsure/Don’t know | 8% | 17% | 13% |
| Approximate Average Expense Ratio of Plan Investments | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| <0.25% (<25 bps12) | 18% | 15% | 13% |
| 0.25% – 0.50% (25 – 50 bps) | 27% | 12% | 19% |
| >0.50% – 0.75% (51– 75 bps) | 14% | 12% | 11% |
| >0.75% –1.0% (76 –100 bps) | 7% | 8% | 9% |
| >1.0% – 1.5% (101– 150 bps) | 3% | 3% | 7% |
| >1.5% (>150 bps) | 1% | 2% | 1% |
| Unsure/Don’t know | 31% | 48% | 41% |
| 12Basis points | |||
Frequency of Formal Review of Administrative Costs/Fees
| All Plans | <$1MM | $1MM–$5MM | |
|---|---|---|---|
| Annually | 74% | 67% | 74% |
| Every 1 to 2 years | 10% | 7% | 10% |
| Every >2 to 3 years | 6% | 3% | 4% |
| Every >3 to 5 years | 2% | 0% | 1% |
| Every >5 years | 1% | 1% | 1% |
| Unsure/Don’t know | 7% | 23% | 10% |
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 | 42% | 15% | 26% | |
| Yes, and we plan to externally benchmark our plan’s cost/fees in the near future | 7% | 5% | 6% | |
| Yes, but we did not externally benchmark our plan’s cost/fees | 19% | 17% | 21% | |
| No, but we intend to calculate total fees in the next 6 months | 3% | 6% | 5% | |
| No, but we may do it at some point in the future | 14% | 33% | 24% | |
| Unsure/Don’t know | 14% | 24% | 18% | |
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 | 14% | 14% | 14% |
| Median | 11% | 3% | 8% |
| Success Measures Used | |||
|---|---|---|---|
| All Plans | <$1MM | $1MM–$5MM | |
| Participation rates | 71% | 38% | 55% |
| Deferral rates | 60% | 26% | 40% |
| External benchmarking of plan design | 30% | 10% | 16% |
| Participants saving to match | 25% | 11% | 15% |
| Employee satisfaction with plan (survey) | 16% | 6% | 13% |
| Participant assets allocated “appropriately” | 15% | 5% | 7% |
| Participants using advice tools/seminars offered | 15% | 5% | 6% |
| Participants increasing deferral rates in past year | 12% | 3% | 7% |
| Participants meeting income replacement goals | 11% | 5% | 5% |
| Participants meeting projected retirement income goals | 10% | 3% | 6% |
| Have no formal plan success measures | 22% | 53% | 35% |