Taking notice that women are playing a bigger role in defined contribution plan administration, researchers at Morningstar Inc. wanted to know if greater gender diversity in plan administration led to better practices.
The answer is a resounding "Yes," according to a study that measured three characteristics of what the Chicago-based research firm considers enlightened plan design.
"We find that the probability of a plan offering these services is higher if the plan administrator is female, and the differences are statistically significant," said the Morningstar report. "In other words, female plan administrators run better plans than their male counterparts."
The report, "Wonder Women: Why Defined Contribution Plans Benefit from Female Plan Administrators," was issued March 2.
"The effect is incredibly strong," said David Blanchett, head of retirement research, in an interview, referring to the link between female DC administrators and higher quality plans as measured by the three factors — use of auto enrollment, offering of defaults (primarily target-date funds) and compliance with a series of ERISA best practices guidelines.
Using Form 5500 data, Morningstar researchers tracked the increasing percentage of female plan administrators over time and then matched those results with the growth of those three factors.
The best practices component is defined by compliance with ERISA Section 404(c). Compliance "relieves plan sponsors and other fiduciaries from liability from losses resulting from participants' direction of their investments," the report explained.
Compliance is voluntary and "is assumed to be a 'signal' for quality overall plan governance," the report said. Plans that signify compliance "are assumed likely to have better plan governance procedures than those without."
The best practices include, among other things, offering a broad range of investments and providing adequate information to participants about investment options.