Survey Finds Many Employers Are Using Automatic Features in Defined Contribution Plans

November 29, 2007

Contact:
Brenda Rood
(262) 373-7756
brendar@ifebp.org

Brookfield, Wisconsin— Investment Management Services, a new survey published by the International Foundation of Employee Benefit Plans, looks at organizations’ relationship with, and use of, investment service providers.

“In the past few years, investment management service providers have expanded the products and services provided to pension plans, especially to defined contribution plans,” said Kelli Kolsrud, Senior Information/Research Specialist at the International Foundation. “Reflecting the trend toward more automatic features in defined contribution plans, our survey shows the growing popularity of target date funds, automatic rebalancing, managed accounts and investment advice.”

The survey looks at use of investment management services by both defined contribution (DC) and defined benefit (DB) pension plans.

Key Survey Results for Defined Contribution Plans

• Most, 54%, of U.S. DC respondents use a bundled service provider arrangement, 31% use an unbundled arrangement and 8% use an alliance arrangement.
  
• Over half, 55%, of survey respondents with DC plans review investment
  performance quarterly. About a third, 34%, of DC plan sponsors pay service provider fees based on agreed-upon levels of performance or service.
  
• Target retirement date funds, also called life cycle investment funds, are a popular investment product chosen by 45% of all U.S. DC plan respondents. Another common service with U.S. DC plan respondents is automatic rebalancing, offered by 41%.

• More than two-thirds, 69%, of DC plans sponsors responding to the survey use an investment management consultant.

Key Survey Results for Defined Benefit Plans

• Almost all, 94%, of DB plan respondents use outside investment managers to invest plan assets.

• Nearly two-thirds, 65%, of responding DB plan sponsors review investment manager performance quarterly. About one-third of DB respondents meet with their investment managers once a year, and a quarter do so only as necessary.

• A substantial majority, 88%, of responding DB plan sponsors, hire consultants to assist with plan investment management.

Investment Management Services includes eight sample requests for proposal (RFPs) used to solicit bids for plan investment services. The survey reflects responses from 167 corporations, multiemployer trust funds and public/governmental employers in the United States and Canada.

Investment Management Services is the latest publication in the Survey & Sample Series. The series was created to provide survey data and samples on a variety of employee benefit topics to allow benefits professionals to compare their plans to others, determine trends and costs, and better manage their plans. Also recently published in the series are Retiree Health Care, Newsletters for Employees and Plan Participants, Public Employee Benefits, Family and Medical Leave, and Flexible Benefit Plans and FSAs. For more information, visit www.ifebp.org/surveysample.

Investment Management Services is 254 pages and is available for $107 (I.F. Members $43), plus shipping and handling. Order a copy online at www.ifebp.org/books.asp?6405 or call (888) 334-3327, option 4. Item #6405. Available in print, CD-ROM and e-book formats.

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The International Foundation of Employee Benefit Plans is a nonprofit educational association serving the employee benefits and compensation industry. Total membership includes more than 35,000 individuals representing over 8,300 trust funds, corporations, public employee groups and professional advisory firms in the United States and Canada.