Survey Finds Shift to Fixed-Fee RK Arrangements

By ASPPA Net Staff • September 23, 2016 • 0 Comments
A new survey finds that more than 80% of plans have recontracted their record keeping fees since 2013 — and that more than half now have a fixed-fee record keeping arrangement.

According to the 11th Annual NEPC Defined Contribution Plan and Fee Survey, the asset-weighted average expense ratio for DC plans is currently 0.42%, versus the 2006 level of 0.57% when NEPC first conducted its study.

In terms of plan design, the survey shows that the median number of plan investment options for participants is 22, the same as last year. Among those investment options, target date funds are still the cornerstone of defined contribution offerings, with these turnkey solutions available in 94% of plans. Furthermore, 88% of plans use TDFs as their qualified default investment alternatives.

The survey found that about a third (34%) of plans include passive TDFs, and about 43% of plans have the makings of a passive tier to complement active options. The median number of passive core offerings is three; 10% of plans added an index fund in 2015 as a new or replacement offering.

Other survey findings include:

  • Lifetime income offerings are now offered by 5% of plans; none offered them in 2012.

  • The percentage of plans offering stable value funds remains unchanged at 47%, the same level as 2012. NEPC notes that the prevalence of the option didn’t decline significantly following the credit crisis, nor has it increased as a result of low interest rates and money market reform.

  • In 2006, just one in four plans offered brokerage services, and this year almost half (49%) of plans have this feature, with 54% offering full brokerage and 46% offering only mutual funds. However, only 1% of employees use this feature.

  • Company stock remains a fixture in retirement plans, offered in 28% of plans.

  • Approximately 60% of public companies offer these securities.

The survey also found that asset-weighted average expense ratio for health care DC plans is 0.50% (versus 0.42% in corporate DC plans), down from 0.64% in 2013.

The 11th Annual NEPC Defined Contribution Plan and Fee Survey had 117 respondents from DC plans with $127 billion in aggregate assets, representing 1.4 million plan participants. The average plan size of the respondents was $1.1 billion and each plan had more than 12,000 participants.