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Defined Contribution

NAGDCA: Collective investment trusts gaining ground in DC plans

Collective investment trusts are becoming more popular among government defined contribution plans, according to a survey from the National Association of Government Defined Contribution Administrators.

Last year, 59% of plans responding to the NAGDCA survey offered collective investment trusts vs. 57% in 2016 and 54% in 2015.

"The driving force is fees," said Keith Overly, president of NAGDCA, in an interview Monday. Survey results were presented at NAGDCA's annual conference, which began Sunday and is being held in Philadelphia through Wednesday. Mr. Overly is executive director of the $13.4 billion Ohio Public Employees Deferred Compensation Program, Columbus.

The survey also found a slightly lower offering of mutual funds among government DC plans, falling to 82% last year vs. 84% in 2016 vs. 88% in 2015.

The survey also reported that 65% of plans offered separate accounts last year vs. 70% in 2016 and 69% in 2015. The survey allowed multiple answers.

Mutual funds still accounted for the bulk of plan assets last year — 46% vs. 24% for separate accounts, 23% for collective investment trusts and 7% for other investment vehicles.

The survey covered 63 plans with a total of $165 billion in assets. Fifty-nine percent of respondents were 457(b) plans, 16% each 401(a) plans and 401(k) plans, and 9% 403(b) plans.

The survey also found that passive investments are playing an increasing role in plan assets, growing to 33% last year vs. 28% in 2016 and 22% in 2015.

Mr. Overly speculated that the passive investment growth reflects are greater use of target-date funds as qualified default investment alternatives as target-date funds feature more index investing.

The NAGDCA survey noted that 53% of sponsors offered off-the-shelf target-date funds as the QDIA and another 25% offered custom target-date funds as the QDIA.

The NAGDCA survey also reported that only 19% of plans offer auto enrollment vs. 20% in 2016 and 26% in 2015. Mr. Overly said the biggest problem is the fact that many states' laws prohibit 457(b) plans offering auto enrollment because they don't allow money to be taken from a paycheck without individuals' permission.

In the latest survey, 13% of respondents said they plan to offer auto enrollment, the first time NAGDCA has asked this question.