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Defined Contribution

Callan: Plan fees still dominate DC execs thoughts, actions

Plan fees continue to dominate the thinking and actions of defined contribution executives, far exceeding other plan issues, according to a survey published Thursday by Callan.

When asked about the most important step plan sponsors took within the past 12 months to improve their fiduciary position, plan fees dominated the responses, said Jamie McAllister, senior vice president and DC consultant, at a news conference about the survey results.

Based on comments from sponsors, there will be "continued pressure" on administrative and investment fees this year, said Ms. McAllister, co-author of the survey with Lori Lucas, executive vice president and defined contribution practice leader at Callan.

Using a scoring system in which 5 represented the highest score for importance, reviewing plan fees rated an aggregate 4, well ahead of the second-place score of 2.6 for sponsors who cited reviewing or updating investment policy statements as most important. Conducting fiduciary training placed a distant third with a 1.9 score.

During the past four years of the annual Callan survey, fee review ranked first in importance in 2014, 2016 and 2017, and second in 2015 when investment policy statement review placed first.

When sponsors were asked what they would do this year to address fees, the survey report said the top responses were conduct a fee study (37.9% said they were very likely to do this); renegotiate record-keeper fees (25.8%); switch certain investment options to lower-fee share classes (17.6%); and renegotiate investment manager fees (16.9%).

In addition, Ms. Lucas said she was "pleasantly surprised" about sponsors' auto-features efforts and "how robustly they have been implemented."

Although the percentage of non-government plans offering auto enrollment increased modestly to 71.4% last year from 69.7% in 2016, Ms. Lucas noted that 12.7% auto-enrolled all employees — not just new ones — via a one-time sweep, and another 12.7% auto-enrolled all employees through a periodic sweep.

In last year's survey, a total of 21.6% of plans offered a one-time or periodic sweep."It's becoming more common to have everyone enrolled rather than just new employees," Ms. Lucas said.

The survey covered 152 plans, of which 64.5% were 401(k) plans. The percentage of 457 plans was 21.7%, far higher than the 7.9% in the 2016 survey. More than 90% of the plans in the latest survey had more than $100 million in assets, and 60.5% had more than $1 billion in assets.