Think target-date funds are the default choice du jour for defined contribution plan sponsors? Think again.

According to new research from AllianceBernstein, of the more than 50% of plan sponsors that offer target-date funds in DC plans, only half of them are using TDFs as their default. Other key plan sponsor findings include:

• Of the 50% of sponsors offering a TDF, but not using it as the default, an alarming 83% have no default at all or are still using a stable value fund, an equity fund or a bond fund - none of which are QDIAs - as the default.

• Only 22% of large plan (those with $250 million or more in assets) sponsors and 21% of midsize plan (those with $1 million to $249 million in assets) sponsors reported that they have adopted customized TDFs (36% of large plan sponsors said they have not adopted customized TDFs because they weren't aware of the benefits of the improved structure).

• Fifty four percent of sponsors of large plans and 43% of sponsors of midsize plans said the goal of their TDF is to ensure that savings last through participants' retirement years - versus only 32% of sponsors of small plans (those with less than $1 million in assets).

• Forty one percent of small plan sponsors said the goal of their TDF is to ensure a minimum acceptable level of savings at retirement.

• Thirty seven percent of midsize plan sponsors were concerned with improving participation, while only 28% of sponsors of small- or $500 million+ large-size plans were concerned. Small plans have the lowest participation rates (30% or less), while large plans have the highest participation rates (86% or higher).

On the participant front, the survey revealed that 38% of participants called themselves active investors – noting that they started saving early, while 62% of participants consider themselves accidental investors, unenthusiastic about saving and investing. Of the active investors, 39% said they use TDFs (upfrom 29% in 2009) and 27% of accidental investors said they use them (up from 21% in 2009).

Also, 87% of actives and 72% of accidentals said they are equally or more satisfied with their TDFs than with other investments in their plans.

"It's striking that despite the almost polar opposite behavioral differences between active and accidental investors, both groups give TDFs high marks,” stated Joe Healy, Head of AllianceBernstein's Defined Contribution Client Experience.

“It certainly suggests that sponsors can stave off behavioral biases and encourage savings by defaulting people into easy-to-understand investment solutions like TDFs that also provide sophisticated asset-allocation features to satisfy savvy investors."

This year's plan participant survey was conducted online in February 2012 with 1,002 respondents who were full-time employees at least 18 years of age and working for companies that offered DC plans. The firm’s plan sponsor survey was conducted online in November 2011, and included 1,018 respondents nationwide, representing small plans (with assets of less than $1 million), midsize plans (with assets between $1 million and $249 million) and large plans (with assets of $250 million or more).

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