As plan sponsors and DC specialists continue to share their perspectives on many aspects of plan support and service, new survey finds DC specialists have the opportunity to further demonstrate the value they offer .
According to the Third Edition of Voya Investment Management’s Survey of Plan Sponsors and CD Specialists, promoters are apparently turning to specialists for a wide range of advice and want higher levels of expertise, underscoring the need for specialists to make promoters aware of all they can do.
The survey, conducted in 2021 between mid-February and early March, also found a mismatch between plan sponsors and DC specialists in terms of what DC specialists say they deliver versus what plan sponsors. recognize. As in previous iterations of Voya’s investigation, DC specialists have once again stated that they provide a range of services that plan sponsors do not recognize, highlighting a persistent communication problem.
Like 2016 and 2018, the main concern of the sponsors remains “to ensure that the plan complies with the new regulations”. “Reducing plan fees and expenses” has been a recurring concern, and although its response percentage has remained unchanged, its ranking has dropped from second place in 2018 to fifth place in 2021 because other concerns have taken hold. importance, the study notes.
Receiving assistance in selecting and monitoring investments is the area of assistance most often mentioned by plan sponsors, followed closely by advice on plan design and features. With the additional survey specification of 3 (38) fiduciary services, sponsors were significantly less likely to indicate fiduciary services as the primary area of support.
Larger plans reported greater support for plan design and advice on other types of pension plans, while smaller plans were the least likely to note DC specialist fiduciary support 3 (38) or help choosing a Qualified Default Investment Alternative (QDIA). The 2021 survey also revealed high fiduciary concerns among plan sponsors as a result of the increase in ERISA lawsuits in 2020, according to the study.
According to the study, significant changes between concerns such as:
- ensure participants are invested appropriately;
- help participants improve their financial well-being; and
- changing number / types of investment options.
The 2021 survey also found an increase in sponsor recognition that DC Specialists help keep plan costs reasonable (93%) and that DC Specialist compensation is commensurate with the support provided (85%). . Sponsors are also more likely to say they understand the DC specialist’s compensation and expense information (73%), Voya IM notes.
“Based on the results of this survey, there are things that specialists can do that demonstrate their value,” notes Jake Tuzza, Intermediate Distribution Manager at Voya IM. “For example, express your worth by taking an inventory of the services you provide to each sponsor and rate yourself how well your services are focused on their priorities.”
Tuzza also recommends adopting ESG in the investment selection process. “We expect to see increased demand for ESG strategies, especially as younger employees make up a larger percentage of plan members,” he notes.
That said, survey respondents expressed mixed feelings about ESG investing, with low levels of strong sentiment on the issue. According to the results, CD specialists were more likely than plan sponsors to have a good understanding of ESG investing, but both groups said they would appreciate additional training.
The survey also revealed greater sensitivity among plan sponsors regarding issues of diversity and equal access to plan benefits. Plan sponsors are more likely than DC specialists to say they could do more to help minority members get more from their pension plans.
COVID, TDF and SECURE Act
The survey also looked at several other issues impacting sponsors and specialists:
- SECURE law. A majority of promoters and DC specialists agree that the SECURE Act encouraged plans to focus on retirement income. Voya IM notes that offering a retirement income solution can complement financial wellness programs, such as online tools and calculators, retirement income planning education, and investing education. Yet although the majority of sponsors plan to offer retirement income options, such as guaranteed income products for life, those options are not yet widely available, the study further notes.
- Use of target date funds. Many industry professionals view FDTs as a “fundamental” part of a pension plan and less of a primary concern. To this end, mid-sized plans have significantly increased their use of TDFs since 2018, from 56% to 74%, in line with larger plans. In contrast, smaller plans are now self-contained with usage levels below around 53%, the study notes. In total, almost 6 in 10 sponsors include TDF in their plans, up slightly from 2018. Of the 4 in 10 sponsors who say their plans do not currently offer TDF, two in five say they would prefer to include them, compared to one in three in 2018 and one in four in 2016.
- Impact of COVID. The most common impact of COVID on pension plans has been an increase in hardship withdrawals. Voya IM found that only one in five sponsors saw no impact, and many noted the need for a “post-COVID realignment” to achieve better outcomes for attendees and plans. COVID amplified trends that were already underway, including increased attention to designing plans, reviewing / renewing service offerings, and focusing on the digital experience, the study said.
Brookmark Research has assisted Voya IM in the development, execution and analysis of surveys of plan sponsors and DC specialists. The study divided sponsors into three segments: plans worth $ 1 million to less than $ 5 million; plans with $ 5 million to less than $ 25 million; and plans with over $ 25 million.