For all of the attention given to the word "fiduciary" in the business and mainstream media over the past two years, a lot of plan sponsors have not gotten the memo.
According to data from AllianceBernstein, half of plan sponsors don’t think they are fiduciaries. Under the Employee Retirement Income Security Act, any employer sponsor of a retirement plan is a fiduciary.
Perhaps more troubling is the fact that sponsors’ awareness of their legal role as fiduciaries is down 19 points since 2011, according to the investment management firm.
Even among those sponsors that acknowledge they have primary responsibility for overseeing their retirement plans, one-third don’t believe they are fiduciaries.
And among those that don’t recognize they are fiduciaries, four in 10 are making all of the decisions according to the plan. AB surveyed over 1,000 sponsors spanning the spectrum of plan size.
A release from the firm says sponsor fiduciary awareness is higher among employers that hire outside plan advisors and consultants.
Plans that use advisors showed greater productivity among several key metrics:
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the average participation rate was 49 percent among advised plans, compared to 40 percent of non-advised plans;
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57 percent of participants increased savings rates in advised plans, compared to 37 percent of non-advised plans;
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and 22 percent of participants in advised plans improved their retirement readiness, compared to 11 percent in non-advised plans.
Only four in 10 sponsors said their plan has an investment policy statement in place, a practice ERISA attorneys insist on. Another 20 percent of sponsors don’t document their fiduciary process, and among those that do, more than half say their oversight needs improvement.
On some scores, sponsors are showing responsiveness to best practices, in spite of the shockingly low levels of fiduciary awareness.
About four in 10 plans have re-enrolled employees in the past three years. One in five participants opt out of plans after being automatically enrolled.
Financial wellness programs continue to gain traction, but adoption is concentrated in institutional size plans, or those with more than $250 million in assets. Half of the largest plans offer some form of wellness program, compared to 25 percent of small and micro plans.
More than half of sponsors said they’ve seen the retirement age rise in their companies over the past five years; one-quarter said the average retirement age was 67.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
