Callan’s 2018 DC Trends Survey Finds Plan Sponsors Focused on Fees, Retirement Readiness

Study also reveals financial wellness will be a key area of communication focus in 2018

San Francisco, Jan. 19, 2018 (GLOBE NEWSWIRE) -- Callan LLC, a leading institutional investment consulting firm, today announced the results of its 2018 Defined Contribution (DC) Trends Survey, offering actionable insights for plan sponsors, consultants, and asset managers.

The survey, conducted by Callan in the fall of 2017, incorporated responses from 152 plan sponsors. Top 2018 priorities reflected in the survey are retirement readiness, plan fees, and participant communication.

Nearly three quarters of non-government plans use auto enrollment. Four out of five plans with auto enrollment also offered automatic contribution escalation. Additionally, plan sponsors reported the highest average auto enroll default contribution rate in the survey’s history (4.6%).

Other key survey findings:

  • Fees matter: Plan sponsors cited the most important step in improving fiduciary position in 2017 was reviewing plan fees—by a wide margin.
  • Fund type trends: U.S. small/mid cap equity funds were the top fund to be added in 2017 and among the most likely to be eliminated in 2018.
  • Plan leakage: The number of plans with a policy for retaining retiree/terminated assets climbed to 61%, with half pursuing a policy of seeking to retain these assets.
  • Retirement readiness: Plan sponsors rate retirement readiness as their primary area of focus, but financial wellness will be a key area of communication focus.
  • Plan discretion confusion: Four out of five plan sponsors said they engage an investment consultant, but a third of those respondents were unsure whether their consultant has discretion over the plan.
  • Plan success factors: The three most important factors cited by plan sponsors in measuring plan success were participation, investment performance, and contribution rates.
  • Revenue sharing use down: Plan sponsors reported a decrease in use of revenue sharing to pay fees, with the most common fee payment approach reported as explicit per participant fees (54.7%).
  • Target date funds: More than half of plan sponsors took action with regard to their target date funds in 2017; 52% of those taking action evaluated their target date glide’s path suitability for their plan. Among those offering target date funds, over 70% offered one that is at least partially indexed.

“Automatic plan features such as an automatic enrollment and automatic contribution escalation have become the norm,” said Lori Lucas, executive vice president of Fund Sponsor Consulting and head of the Defined Contributions Practice at Callan, “and the latest survey shows that such features are being offered more and more robustly—default contribution rates and caps on contribution escalation are higher, and more plans are auto enrolling existing employees as well as new hires. Interestingly, many plan sponsors also report that a top area of communication focus will be financial wellness in 2018. The message here is that employers are looking not just at retirement income adequacy, but employees’ overall financial security."

Jamie McAllister, senior vice president, defined contribution consultant and co-author of the survey, added, “We expect to see continued pressure on fees in 2018 – both administrative and investment management fees. According to our latest survey, just over 50% of sponsors intend to renegotiate administrative fees, which is in line with last year. As for investment management fees, this jumped up from being in the bottom five steps last year to being the 4th most likely step in 2018, with approximately 40% of plan sponsors expecting to renegotiate investment management fees. While these actions will likely lead to changes in fees, plan sponsors surprisingly didn’t rank fee communications as a high priority—fee communication only ranked 2.5 on a scale of 1 to 7, with 7 being the highest focus area.”

The majority of respondents, which included both Callan clients and other organizations, offered a 401(k) plan (64.5%) as the primary DC plan. More than 90% of plans in the survey had over $100 million in assets; and 60.5% were “mega plans” with more than $1 billion in assets, an increase of 32.4% from 2016. The percentage of government plans responding to the survey nearly tripled from 2016 to 35.6%.

Download the full 2018 survey here:

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About The Callan Institute

The Callan Institute, established in 1980, is a source of continuing education for those in the institutional investment community. The Institute conducts conferences and workshops and provides published research, surveys and newsletters. The Institute strives to present the most timely and relevant research and education available so our clients and our associates stay abreast of important trends in the investments industry.


About Callan LLC                                                                

Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have empowered institutional clients with creative, customized investment solutions that are backed by proprietary research, exclusive data, and ongoing education. Today, Callan advises on more than $2 trillion in total fund sponsor assets, which makes it among the largest independently owned investment consulting firms in the U.S. Callan uses a client-focused consulting model to serve pension and defined contribution plan sponsors, endowments, foundations, independent investment advisers, investment managers, and other asset owners. Callan has five offices throughout the U.S.


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