Benefits June 13, 2005

Survey: Road to DC Happiness Includes Fewer Investment Options, Advice

June 13, 2005 (PLANSPONSOR.com) - Defined contribution plan sponsors believe fewer investments options and more financial advice would best serve participants, a new survey found.
Reported by

A news release said that Callan Associates’ triannual survey of DC plan sponsors revealed that the average number of investment choices in DC plans was 16 in 2004, down from 20 in 2001. In 1998, sponsors offered an average of 11 investment choices.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“In the bull market, a philosophy of ‘more is better’ prevailed,” said Anna Oakley, Callan vice president, DC Practice Leader, in the news release “As the market moderated, plans found that too many choices could overwhelm participants and lead to bad investment decisions.”

Asset allocation or lifecycle funds remain an important plan offering, with 74% of plan sponsors including them in lineups (See Simplicity Sells ). Risk-based lifestyle funds still represent the majority, but time-based funds have risen to 42% of the mix this year versus 22% in 2001, Callan found. Callan respondents noted that time-based products are easier to explain and easier for participants to understand.

Advice Offerings

When it comes to the always hot area of retirement planning advice, one-third of Callan’s survey respondents are offering advisory services to participants, with another third indicating that adding an advice component is a priority for 2005. Of the respondents currently providing advice, about six in 10 rely on an independent Web-based provider, while only 21% use their recordkeeper’s proprietary model for these services, Callan found. In 2001, of the DC plan providers offering advice, 43% used their recordkeeper.

Callan said the consulting firm was concerned about the number of plans using outside advice vendors since only 36% of plan sponsors have procedures to monitor these providers.

One topic high on the agenda for the DC plans in the Callan survey: the level of fees. Virtually every plan has had a fee discussion and/or reduction with their current provider within the past three years, with well more than half conducting such a review within the past year, the survey found. One-third of sponsors said they would be willing to incur an annual per-participant recordkeeping fee to minimize the impact of investment management fees on plan assets.

Other survey results showed that:

  • the number of plans maintaining a documented investment policy statement increased to 86%, from 78% in 2001
  • three-quarters of respondents conduct quarterly meetings to address oversight responsibilities including investment policy and 404(c) compliance
  • corporate Treasury staff, which has typically been responsible for a company’s defined benefit (DB) plan, are now more commonly sharing the duties of DC plan oversight once held almost exclusively by Human Resources (HR). Investment oversight of DC plans at three-quarters (76%) of responding firms falls to a committee including staff from both HR and Treasury/Finance, compared with only 59% in 2001 and 51% in 1998.

Callan conducted the survey in late 2004 and drew responses from 95 plan sponsors with more than $100 billion in total assets and 1.1 million participants.

Administration June 12, 2005

SC Hires Stock Investment Analyst

December 30, 2003 (PLANSPONSOR.com) - South Carolina Retirement Systems (SCRS) has hired a full-time investment analyst for the state's $9.5 billion stock portfolio.
Reported by

Taking the reins of the newly created post is money management veteran Brian Collett.   In the position, Collett will w atch over SCRS’ generally conservative investment panel and provide a counterweight to its roughly 17 outside money managers, according to a Charleston Post Courier report.

Collett currently is a senior technology analyst with the Frank Russell Investment Group, an international investment management company based in Tacoma, Washington.   He will start in his new position January 13, 2004 at an annual salary of $95,000.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The relative late coming of an equity analyst at the fund is not that surprising given that South Carolina only began investing pension funds in stocks in 1999 – the last state in the nation to make such a move.   Since that time, the system has moved 40% of the pension fund into stocks, the maximum permitted by law.

Even with the sudden shift into equities, the Palmetto State maintained a conservative strategy that helped buoy investment returns at a time many public pension were suffering catastrophic losses.   Data from Wilshire Associates Inc shows SCRS has returned 9% as of June 30, more than double the national median of about 4%.   Further, in 2002, South Carolina’s fund was one of only handful to post an investment return in black ink.  

Thus, holding to the old adage, “if it’s not broken, don’t fix it,” the state will continue to contract with Mercer Investment Consulting, which provides investment analysis, money manager searches and other consulting services; bringing Collett on to filter some of the advice given by Mercer.

«