Callan’s Defined Contribution Trends Survey Reveals Focus on Plan Fees, Participant Communication, and Financial Wellness

Business Wire

Cybersecurity set as low priority, improving company match a higher priority

SAN FRANCISCO--(BUSINESS WIRE)-- Callan, a leading institutional investment consulting firm, announced today the results of its 2019 Defined Contribution (DC) Trends Survey. In its 12^th year, the survey offers actionable insights for corporate defined contribution plan sponsors. You may view the survey here.

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Conducted by Callan in the fall of 2018, the survey incorporates responses of 106 plan sponsors—highlighting key themes and findings from 2018 and expectations and goals for 2019. Top priorities for the coming year are plan fees, participant outreach, and participant financial wellness.

“We are grateful for the tremendous participation from our clients and non-clients in helping create such a robust survey,” said co-author and Callan defined contribution practice leader Greg Ungerman. “Their input helps the industry better understand the evolution and significant growth of the defined contribution market that we’ve witnessed over the past decade.”

The majority of survey respondents offer a 401(k) plan as the primary DC plan (86%). Also, 85% of the DC plans surveyed offer a Roth feature—a notable increase from 68% in 2016.

More key survey findings:

Fees: Plan sponsors cited the most important step in improving fiduciary positioning in 2018 was reviewing plan fees—by a wide margin. Also, fee payments are shifting away from participants: about one third (32.5%) of all administrative fees were paid entirely by participants, down significantly from 62.7% in 2017.
Success measurement: Plans cited participation, contribution rates, and cost effectiveness as the most important indicators of plan success in 2018.
Cybersecurity: Despite being a newsworthy topic, cybersecurity was reported as a low priority for 2019.
Company match: 22% made a change to their company match policy, with 33% increasing the match rate. These numbers are up significantly from 2017.
Asset retention: 58% have a policy on asset retention, with 70% focused on retaining assets.
Consultant engagement: 4 out of 5 plans work with an investment consultant. 16% gave their consultants some level of discretion over their plans, while 16% are unsure if their consultant has discretion.
Fund types: 87% of plans have a target date fund, and 75% use collective trusts in their fund lineups.
Recordkeeper searches: 1 in 5 plans (20%) intend to conduct a recordkeeper search in 2019.

“With the amount of fee study and recordkeeper search project work we see, it is not surprising that fees are the No. 1 priority for plan sponsors in 2019,” said co-author and Callan defined contribution consultant Jamie McAllister. “What is surprising: Over 40% of plan sponsors said they don’t evaluate indirect revenue when calculating and benchmarking fees. As indirect revenue can be a meaningful amount, we feel it’s important for sponsors to consider this in their overall fee evaluation.”

About Callan

Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have empowered institutional clients with creative, customized investment solutions 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 six offices throughout the U.S. Learn more at callan.com.

About Callan Institute

The Callan Institute aims to improve the best practices of the institutional investment community through research, education, and dialogue. To support this mission, the Callan Institute publishes practical research, hosts industry events, and sponsors a robust educational curriculum. Learn more at callan.com/callaninstitute.