Plan Sponsors Want DC Specialists with Broad Expertise

While plan sponsors and DC specialists continue to share views on many aspects of plan support and service, a new survey finds that DC specialists have an opportunity to further demonstrate the value they provide. 

According to the third edition of Voya Investment Management’s survey of plan sponsors and DC specialists, sponsors apparently are looking to specialists for a broad spectrum of advice and want higher levels of expertise, underscoring the need for specialists to make sponsors aware of all that they can do. 

The survey, conducted in 2021 between mid-February and early March, also found a disconnect between plan sponsors and DC specialists in terms of what DC specialists say they provide versus what plan sponsors recognize. As in prior iterations of Voya’s survey, DC specialists again said they provide an array of services that plan sponsors do not acknowledge, pointing to a persistent communications problem. 

Sponsor Priorities

As 2016 and 2018, sponsors’ top concern remains “ensure plan complies with new regulations.” “Reduce plan fees and expenses” has been a recurrent focus, and even though its percentage response was unchanged, its ranking moved from second place in 2018 to fifth place in 2021 because other concerns increased in importance, the study notes. 

Receiving assistance with investment selection and monitoring is the support area plan sponsors most frequently mentioned, followed closely by guidance on plan design and features. With the survey’s added specification of 3(38) fiduciary services, sponsors were significantly less likely to indicate fiduciary services as a leading area of support.

Larger plans indicated greater support for plan design and guidance on other types of retirement plans, while smaller plans were the least likely to note DC specialist 3(38) fiduciary support or help with choosing a qualified default investment alternative (QDIA). The 2021 survey also found elevated fiduciary concerns among plan sponsors, a consequence of increased ERISA lawsuits in 2020, according to the study. 

Also notable, according to the study, are the significant shifts among concerns such as:

• ensuring participants are appropriately invested; 
• helping participants with financial wellness; and 
• changing number/types of investment options. 

The 2021 survey also found upticks 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 also are more likely to say they understand the DC specialist’s compensation and fee disclosures (73%), Voya IM notes. 

“Given the results of this survey, there are things specialists can do that demonstrate their value,” notes Jake Tuzza, head of Intermediary Distribution at Voya IM. “For example, articulate your value by drawing up an inventory of the services you provide to each sponsor and assess yourself on how closely your services focus on their priorities.” 

ESG Factors

Tuzza also recommends embracing ESG in the investment selection process. “We expect to see increased demand for ESG strategies—especially as younger employees come to represent a greater percentage of plan participants,” he notes.  

That said, the survey respondents registered mixed sentiments on ESG investing, with low levels of strong feeling on the issue. According to the findings, DC specialists were more likely than plan sponsors to have a good understanding of ESG investing, but both groups said they would value additional education.

The survey also found 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 that they could do more to help minority participants take better advantage of their retirement plans. 
COVID, TDFs and SECURE Act

The survey also looked at several other issues impacting sponsors and specialists: 

• SECURE Act. A majority of sponsors and DC specialists agree that the SECURE Act has encouraged plans to adopt a focus on retirement income. Voya IM notes that offering a retirement income solution can complement financial wellness programs, such as online tools and calculators, education on retirement income planning and education on investing. Still, while the majority of sponsors plan to offer retirement income options, such as guaranteed income for life products, these options are not yet widely offered, the study further notes. 
• Use of Target Date Funds. Many industry professionals see TDFs as “foundational” components of a retirement plan and less of a forefront concern. To that 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 now stand alone with lower usage levels at about 53%, the study notes. In the aggregate, nearly 6 in 10 sponsors include TDFs in their plans, up modestly from 2018. Of the 4 in 10 sponsors whose say their plans do not currently offer TDFs, two in five say they would prefer to include them, up from one in three in 2018 and one in four in 2016.
• Impact of COVID. The most common COVID-related impact on retirement plans was an increase in hardship withdrawals. Voya IM found that only one in five sponsors saw no impacts, and many noted the need for “post-COVID realignment” to drive better participant and plan outcomes. COVID amplified trends that already were underway, including increased attention to plan design, review/rebidding of service contracts and an emphasis on digital experience, the study emphasizes.  

Brookmark Research assisted Voya IM with the development, execution and analysis of the plan sponsor and DC specialist surveys. The study divided sponsors into three segments: plans with $1 million to less than $5 million; plans with $5 million to less than $25 million; and plans with more than $25 million.