OMB is asking advisers and retirement industry providers for comments about the necessity of providing
Summary Annual Reports to participants, and the burden it might create for industry professionals.
The Department of Labor (DOL) Employee Benefits Security
Administration (EBSA) has sent an information collection request (ICR) titled,
“Employee Retirement Income Security Act Summary Annual Report Requirement,” to
the Office of Management and Budget (OMB) for review and approval for continued
use, without change. The requirement is set to expire at the end of December.
Interested parties are encouraged to send comments to the
OMB.
The OMB is particularly interested in comments that:
Evaluate
whether the proposed collection of information is necessary for the proper
performance of the functions of the agency, including whether the
information will have practical utility;
Evaluate
the accuracy of the agency’s estimate of the burden of the proposed
collection of information, including the validity of the methodology and
assumptions used;
Enhance
the quality, utility, and clarity of the information to be collected; and
Minimize
the burden of the collection of information on those who are to respond,
including through the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms of
information technology, e.g., permitting electronic submission of
responses.
More information about how to obtain the ICR and how to send
comments to the OMB is here.
By using this site you agree to our network wide Privacy Policy.
An extensive new report from BrightScope and the Investment Company
Institute finds 401(k) plans have significantly evolved towards “packages of
features and choice” tailored to individuals, especially in the large-plan
market.
About two-thirds of large 401(k) plans examined by
BrightScope and the Investment Company Institute (ICI) reported using at least
two out of the three key plan features analyzed: automatic enrollment, employer
contributions, and participant loans.
Among these large plans—with at least 100 participants and
at least $1 million in plan assets—fully 18% had evidence of all three plan
features, according to BrightScope and ICI. The firms explain their latest
research focuses on private-sector 401(k) plans, analyzing data from the
Department of Labor on thousands of plans covering a range of sizes. The
organizations also studied detailed investment data from the BrightScope
Defined Contribution Plan Database on more 34,000 large 401(k) plans.
ICI Chief Economist Brian Reid summarizes the findings by
noting, “as employers innovate in plan design, we see evidence that 401(k)
plans have been evolving to offer packages of features and choices of
investment options tailored to participants’ needs.” For example, the
availability of target-date funds (TDFs) on 401(k)s menus has increased very
impressively in recent years. As recently as 2006, just a third of 401(k) plans
included TDFs—a figure that grew to 73% by 2013, the research shows.
It’s a positive industry development, researchers argue,
given that TDFs help ensure age-appropriate asset allocations and proper
rebalancing techniques. “Similarly, the percentage of participants that were
offered target date funds increased from 42% to 75% between 2006 and 2013,”
according to ICI and BrightScope, “and the percentage of assets invested in target
date funds increased from 3% to 15% during this period.”
NEXT: Index funds are widely available in 401(k) plans
The study shows that nine in 10 401(k) plans in the sample
offered index funds in 2013.
“That year, more than 95% of plans with assets of more than
$50 million offered these funds in their plan menus,” the report says, “compared
with about 85% of 401(k) plans with $1 million to $10 million. In addition,
index funds made up a significant component of 401(k) plan assets, holding more
than a quarter of 401(k) plan assets in 2013.”
One particularly positive finding for the average plan participant shows mutual fund fees in 401(k) plans tended to fall between
2009 and 2013. Consistent with other research, the study also found that fund
expenses are typically lower in larger plans—but decreases are showing up across the board.
“For instance, the average asset-weighted expense ratio for
domestic equity mutual funds was 0.81% for plans with $1 million to $10 million
in plan assets, compared with 0.44% for plans holding more than $1 billion in
plan assets,” the report says. “A variety of factors contributed to the
downward trend of both 401(k) total plan costs and the fees of mutual fund in
the plans.”
These factors include continued awareness and focus by plan
sponsors and plan participants on the impact of fees on 401(k) savings, says
Brooks Herman, head of data and research at BrightScope.
“Whether measured for the average 401(k) plan, the average
participant, or the average dollar, total plan costs also have decreased over
time,” she concludes. “For example, total plan cost fell from 1.02% of assets
in the average 401(k) plan in the BrightScope database in 2006 to 0.89% of
assets in 2013. In 2013, the average participant was in a 401(k) plan with a
total plan cost of 0.58% of assets, compared with 0.65% in 2009.”
NEXT: Plan loans and
leakage
The report finds 401(k) plans with automatic enrollment “are
more likely to have both employer contributions and participant loans outstanding
than plans without automatic enrollment.”
In fact, in 2013, nearly three-quarters of large plans
in the sample with automatic enrollment also had both employer contributions
and participant loans outstanding, compared with fewer than three-fifths of
plans in the sample without automatic enrollment. “Even though loans are widely
available, the amounts borrowed represent less than 2% of 401(k) plan
assets,” the research explains. “In addition, DC plan recordkeeper data
indicate that fewer than one in five 401(k) plan participants have loans
outstanding.”
Given these stats, the report classifies auto-enrollment and
plan loans both as key features for encouraging greater plan participation: “Although
participants typically must pay any loans back shortly after leaving their
employers, which can lead to defaults, the existence of a loan feature may
encourage workers to sign up for the plan in the first place, or to defer more of
their salary into the plan.”
The full report, “The BrightScope/ICI Defined Contribution
Plan Profile: A Close Look at 401(k) Plans, 2013,” can be downloaded here.