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Jumbo DC Plan Trends—5 Key Areas of Interest for 2018

Recently, a major financial consulting firm published the results of its 11th annual survey conducted with more than 150 Plan Sponsors.[1] What’s particularly noteworthy about this survey is that over two-thirds of the participating Plan Sponsors represent mega plans with assets over $1 billion. Historically these very large Defined Contribution (DC) plans are the leaders in the market place. Their actions, plan design and adoption of best practices for their retirement benefit programs have trickled down to plans in the large, mid and eventually small market segments. We thought it was worth reviewing several data stories presented in this survey—specifically around:

  • Measures of plan success
  • Key actions taken to improve fiduciary positioning
  • Top 2018 priorities
  • Areas of participant communication focus in 2018
  • The awareness of discretionary vs non-discretionary consultants

Measuring Plan Success
It’s not surprising that the top three measures of plan success continue to be: 1. Participation; 2. Investment performance and 3. Savings rate—tied with retirement income adequacy

But, what is especially encouraging is that retirement readiness, although tied for 3rd is the top area of focus for Plan Sponsors over the next twelve months, as we will highlight later in this document.

Improving Fiduciary Positioning
By far the most frequently noted action by Plan Sponsors to improve fiduciary positioning from among 15 possible actions is the review of plan fees. This action was noted one and one-half times more frequently over the next action step of updating or reviewing an investment policy statement (IPS). Also noted near the top for 2017 in the following order were: Conducting formal fiduciary training; Changing investment menu and Conducting plan audit.

Retirement Readiness
A new category in the most recent survey, retirement readiness, came out on top as the most likely area of focus in 2018. Cybersecurity, which PEI has seen increase in importance over the past six months, rose in this survey from near the bottom of importance ranking to the middle. Plan fees continue to rank near the top for importance, as well as participant communications.

Reprioritizing Participant Communication Topics
Ranked in the order of importance are the following seven topics:

  1. Financial Wellness
  2. Retirement Income Adequacy
  3. Contribution Levels
  4. Plan Participation
  5. Investing (market activity, diversification, etc.)
  6. Managing Income in Retirement
  7. Fees

Financial wellness rose from number 5 for 2017 to most important this year and contribution levels dropped to third place. Interesting that with fees being a top priority for Plan Sponsors and the primary action to improve fiduciary positioning that it isn’t of higher importance as a topic to communicate to participants.

Using 3(21) vs. 3(38) Fiduciary Consultant
PEI considers being a co-fiduciary to our clients as our most important role and one that we take very seriously. Our service offering provides multiple layers of fiduciary protection for our clients and their retirement committees and boards. We also have experienced confusion among clients about the role of a 3(21) consultant vs. a 3(38) consultant. This survey addressed this issue and explains the difference between the two roles as follows.

Most simply, a discretionary consultant can be defined as, “one who selects and monitors funds and acts as a co-fiduciary”—this is a 3(38) consultant.

A non-discretionary consultant can be defined as, “one who monitors and recommends changes as a co-fiduciary, while the plan sponsor selects investments of those recommended”—this is a 3(21) consultant.

Over 57% of Plan Sponsors surveyed indicated they retained a 3(21) non-discretionary consultant. Just over 10% indicated that they retained both or only a 3(38) consultant. Of these large Plan Sponsors surveyed, over one-third were unsure of the status of their consultant.

Most PEI clients have determined that their needs are met most appropriately by a 3(21) consulting relationship with PEI. However, if a client were to decide that the needs of their organization required a 3(38) consultant; PEI will act in that capacity also.


[1] 2018 Defined Contribution Trends Survey, The Callan Institute.