The adoption of industry best practices is helping sponsors of higher education retirement plans post better results.
That's the word from Cammack Retirement Group, whose fourth edition of the Higher Education Retirement Plan Survey found that in 2013 and 2014, sponsors made changes in plan design that have resulted in increasing participant success, lessening their administrative burden and minimizing fiduciary risk.
For starters, 90 percent of private institutions that responded to the survey now use an investment advisor of some kind. In 2011 that figure was 71 percent; in 2012, 77 percent. And while 25 percent of those advisors were serving as plan fiduciaries in 2010, now almost 50 percent do.
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Plans are also cutting back on investment options in the name of simplicity. In fact, 65 percent have reduced offerings to under 50 different investments. The trend to narrow the field of investment options makes it easier for plan participants to make decisions, while also making it easier for sponsors to monitor investments.
Along those lines, more than 90 percent of respondents are offering target-date funds, which take the onus off participants to start moving their investments into more conservative holdings as they approach the target date. As a result, participants are increasingly taking advantage of such funds.
That doesn't mean that sponsors should be patting themselves on the back yet. There are holes in best practice adoption that can make a substantial difference to participants and even to sponsors.
For instance, even though plans are becoming ever more automated, just 22 percent have, or even plan to add, an automatic enrollment feature. Of those, only 36 percent have also added automatic escalation.
Then there's the matter of loans. More than half of respondents do not restrict participants to a specified number of outstanding loans — a danger sign for both participant and sponsor, since loans not only weigh on participant account balances but their existence can also affect compliance.
And even though the Department of Labor strongly suggests that fiduciary committees use investment policy statements, only 60 percent of committees do so.
"Overall, we're very pleased to see plan sponsors continue to adopt industry best practices, specifically in the areas of investor and vendor consolidation as well as fiduciary behavior," said Jeff Levy, managing partner at Cammack Retirement, and co-author of the survey. "We believe that the record-high use of advisors and the increasing awareness and adoption of best practices go hand in hand."
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