Retirement plan

Significant gaps exist among 401(k) plan sponsors, recordkeepers and plan participants in their perceptions on several important priorities, new research from Cerulli Associates finds.

Cerulli said these areas of misalignment may offer opportunities for plan providers, advisors and consultants.

The research showed that “plan sponsors and recordkeepers might not be on the same page in thinking about topics related to improving the quality of the investment lineup, minimizing fiduciary risk/avoiding litigation and reducing plan administration costs,” Jessica Sclafani, retirement director at Cerulli, said in a statement.

According to the data, recordkeepers possibly underestimate the importance plan sponsors place on improving the quality of the investment lineup. This was a priority for 27% of plan sponsors, while just 4% of recordkeepers identified it as one for plan sponsors.

Cerulli said it behooved recordkeepers to ask their 401(k) plan sponsor clients how they view the plan’s current investment lineup, and perhaps offer data and anecdotal insights into what other plan sponsor clients are considering in terms of the plan menu.

Another big gap between plan sponsors and recordkeepers emerged on the issue of “minimizing fiduciary risk/avoiding litigation.” Only 16% of plan sponsors surveyed said this was a priority, compared with 36% of recordkeepers.

A closer look at the data showed that 20% of mega plans, those with $1 billion or more in assets, identified this as a concern, versus 13% of micro plans.

Cerulli found that when sponsors and recordkeepers evaluate the success of a plan, they both look at the same metrics. However, there were noticeable points of divergence.

For example, on the metric “average participant balance compared to peer group,” recordkeepers ranked this third, while plans sponsors ranked it sixth.

“The aim in comparing this data is to ensure that when recordkeepers communicate with plan sponsors, whether they are clients or prospects, they focus on the most important, broadly valued metrics and use the same language,” Sclafani said.

She also noted that 401(k) plan sponsors and plan participants may be talking past one another on employees’ responsibility for retirement savings and investment decisions.

Whereas 44% of plan sponsors said employees were responsible for their own retirement savings and investing decisions, 77% of plan participants insisted they had sole responsibility for these decisions.

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