|PR Newswire Association LLC|
One primary area of attention is cost. More than three-quarters of employers said they have made efforts to reduce fund or plan expenses in their defined contribution plans over the past two years, compared to just over half in 2007. When asked what methods they used to reduce fees, 62 percent said they switched share classes to lower-cost alternatives, and half said they swapped out funds for lower-cost alternatives.
"One of the most direct ways to increase participant balances is to increase their returns, which can be done effectively by decreasing investment fees without sacrificing investment quality," said
Increased Use of Institutional Funds
More than 90 percent of employers offered at least one such option in 2013, up from 59 percent in 2007. Forty-four percent utilized these vehicles as their primary fund options in 2013, up from 19 percent in 2007. According to
"Lower-cost institutional funds can substantially benefit participants because their fees are usually 30 to 50 percent lower than retail mutual funds," added
"Broad diversification is one of the core tenets of optimal investing, and specialty sectors provide additional avenues for DC investors to enhance their portfolios and leverage asset classes that have long been employed by institutional investors, such as defined benefit plans and endowments," said Evens.
Employers are also offering index—or passively managed—funds across a growing number of asset classes. "The index approach has been a mainstay among large-cap equity funds, but now we are seeing the passive approach become much more common in other asset classes," added Austin.
Assessing Equity of Fees across Participants
As plan sponsors assess their investment structures, many include an analysis of recordkeeping fees and how they are charged to participants.
Today, 26 percent of plans charge recordkeeping fees as a periodic line item to participants, up from 14 percent in 2011. The number of plans assessing recordkeeping expenses via fund-based fees—for example, by using mutual funds with revenue sharing—decreased from 83 percent in 2011 to 52 percent in 2013.
"Plan sponsors are discovering there are many cost-effective ways to significantly increase participants' savings through reviewing and improving basic components of the plan," said Austin. "In many cases, relatively minor changes in plan design can greatly benefit plan participants' efforts to improve their retirement future."
Click here to read the report highlights.
Sign up for News Alerts: http://aon.mediaroom.com/index.php?s=58