Sponsors of 401(k) plans are determined to get their plans back on track in 2010 to avoid future market pitfalls, starting by taking a hard look at investment offerings and fees, Callan Associates found in its 2010 Defined Contribution Trends Survey.
In 2009, plan sponsors carefully monitored and evaluated fund performance, increased communications to calm participants’ fears about the market decline and reviewed expenses. In fact, they said reviewing plan related-expenses was the most important fiduciary action they took over the past year.
Going forward into 2010, they said reviewing investment structure and plan design will rise in importance.
“In 2009, plan sponsors were consumed with managing poorly performing investments and helping participants navigate the market collapse,” said Lori Lucas, defined contribution practice leader at Callan. “Now that most of the fires have been put out, sponsors are focusing on how to reposition their plans for any market challenges ahead.”
Due to fears over inflation, many sponsors are adding real return or TIPS funds to their lineup, and target-date funds continue to become increasingly popular.
While nearly 19% of sponsors eliminated company matches in 2009, this year, only 8% plan to do so. Further, 58% of sponsors that have either reduced or eliminated the match intend to reinstate it.
Auto features appear to have plateaued at 43.9%. “Market volatility and the weak economic environment in 2009 made it unpalatable for plan sponsors to add features that would involve automatic increases in payroll deductions,” Lucas explained.
The survey was conducted among 90 companies with more than $300 billion in defined contribution assets.