SURVEY SAYS: Retirement Plan Committees

Last week, I asked NewsDash readers, “Do you think your company’s retirement plan committee is in tune with the latest trends? Do you think it’s helpful for non-executive employees to serve on retirement plan committees?”

The majority of respondents serve (87.5%) in a plan sponsor role; 2.5% are advisers or consultants, and 10% serve in a TPA/recordkeeper/investment manager role.

The good news is 73.2% of responding readers think their retirement plan committees are in tune with the latest trends in plan design and investments. However, nearly 22% don’t think their committees are in tune with the latest trends, and 4.9% reported they do not have a retirement plan committee.

More than 20% of respondents said the most recent plan design improvement their company’s retirement plan committee approved or implemented was a move to lower-fee investment funds, while 18% indicated it was the addition of investment choices other than target-date funds, managed accounts or lifetime income options. Automatic enrollment and a change in investment strategy for their defined benefit plan were each selected by more than 10% of respondents.

Nearly 8% of readers responding to the survey said the most recent plan design improvement their company’s retirement plan committee approved or implemented was automatic deferral escalation; 5% each indicated it was the addition of target-date funds or managed accounts and allowing involuntary cashouts of small plan balances; and 3% each reported it was the addition of a lifetime income investment strategy and a change to the pension benefit formula.

Eighteen percent of responding readers selected “other” when asked the most recent plan design improvement their company’s retirement plan committee approved or implemented. Those responses included:

• Moving to a new provider with lower fees;
• Allow earlier participation for new employees;
• Outsourcing the plan “because we do not have the latest trends;”
• Selection of new provider for creating target-date funds;
• Addition of global funds; and
• Change to an all index-fund lineup.

One reader said, “Our committee covers all our plans with assets >$75m, which is approximately 20 plans. Because of this the discussions are much more varied than the list presented above.”

Sixty percent of responding readers think it is helpful to allow non-executive employees to serve on retirement plan committees, while one-quarter say it depends on the employee demographics or size of employer. More than 12% think it is not helpful to allow non-executive employees to serve on retirement plan committees, and 2.5% indicated they don’t know.

The need for non-executive employees on retirement plan committees was expressed emphatically by many readers who chose to share comments, though one expressed that it was not a good idea. Others commented on what their retirement plan committees know, not just about trends, but about their fiduciary duties. Editor’s Choice goes to the reader who said, “Think herding cats. It is not their main job and is hard to keep them informed of the latest trends and what current employees are up to.”

Verbatim 

There is a crucial need to include rank and file members on investment plan committees. There is just too much of a culture gap with executives who believe they know just a little too much about their plan demographics. It's also been my experience that higher-level executives have so little time to devote to committee business; they aren't living up to their fiduciary responsibilities.

A LONG TERM NON-EXECUTIVE EMPLOYEE CAN ADD VALUE TO ANY COMMITTEE.

We already had incorporated many of the plan designs above. So no real recent changes.

Most don't understand that they are fiduciaries. Including only executives makes it hard to get perspective on why staff isn't participating.

Our Committee members represent various business units within our company. Therefore most of them know nothing of retirement trends - it is up to us to educate them and help them make good decisions about our plans.

Having non-executives on the Retirement Committee is not only a good idea, it's essential.

My company stays aware, but doesn't jump on any "hot" items

We have a cross functional group of employees on our committee. We feel everyone (not just management) should have a say about their retirement plan.

We have had the committee with and without non-executive employees and I found that when non-executives employees were on the committee they came with their own agenda and did not look to serve the entire plan population.

Considering the members of our investment committee consider our 401(k) as no more than a supplement to their many other investments and compensation structure it would be certainly be nice for someone who valued the plan to be on the committee.

Credit for our success goes to our consultant. They are great advisers, and have made a great effort to educate us on our fiduciary responsibilities!

"What's up with the market." "Hey, I thought there was food at this meeting."

Think herding cats. It is not their main job and is hard to keep them informed of the latest trends and what current employees are up to.