New AB research shows many DC plan sponsors continue to lack fiduciary awareness and half of plans don't use QDIA safe harbor

NEW YORK, April 27, 2015 /PRNewswire/ -- AllianceBernstein L.P. ("AB") today announced new research showing a decline in fiduciary awareness among plan sponsors from several years ago. Even though all survey participants qualified as plan fiduciaries, more than one-third (37%) aren't aware they are fiduciaries. That's up from 30% in AB's last survey in 2011. The research also indicates nearly half of plan sponsors don't take advantage of the Department of Labor's QDIA (Qualified Default Investment Alternative) safe-harbor protections.

Plan sponsors without a default option are less concerned with improving participation or helping participants with their investment decisions, the research confirms. They're also less likely to know whether they are plan fiduciaries.

"There's a clear correlation between a lack of fiduciary awareness and plan sponsors that are less concerned with increasing employee engagement and protection in retirement plans," said Dick Davies, Senior Managing Director of AB's Defined Contribution business and co-head of North American Institutions.

"What's comforting is that the adoption of target-date funds (TDFs) is rising, and plan sponsors and participants alike want more innovative products that are changing the retirement outcomes for plan participants. These include guaranteed income TDFs, multi-manager funds and other customization options available in the DC marketplace."

The survey findings were compiled from AB's survey of plan sponsors – the fourth since 2006. It offers a comprehensive look at the behaviors, concerns and trends of where DC plans are today and where they are headed. The full report is available at www.abglobal.com/go/insidethemindsps.

Key findings include:

Fiduciary Awareness is Slipping: More than one-third (37 percent) of plan sponsors don't realize they're fiduciaries, up from AB's 2011 plan sponsor survey results. But four of five (82 percent) plan sponsors said fiduciary matters are important or very important.

• Plan sponsors with TDFs are more attuned to fiduciary concerns: Plan sponsors with target-date funds take fiduciary concerns more seriously: 87 percent said fiduciary concerns were important or very important. That's more than the 77 percent result from those planning to offer TDFs and 79 percent from those not planning to offer them. 
• Training makes a difference: Plan sponsors who don't consider themselves fiduciaries were more likely to say their organization doesn't provide training.

QDIAs Needed in More DC Plans: Too many plans either don't use QDIAs—or any default at all. This means they're not taking advantage of QDIA safe-harbor protections that provide legal protections to plan sponsors. Roughly half of respondents don't have QDIAs and one-fifth lack a default investment altogether.

• Small plans missing out most: Thirty-seven percent of the smallest plans lack a default investment, versus just 13 percent of the largest plans.
• Confusion on plan default qualifications: One in five respondents don't know if their plan's default is qualified. Two-thirds of those with stable money or money funds as a default say it's their QDIA, even though stable money and money funds are only valid QDIAs for the first 120 days after a participant enrolls.

It's Time to Transform TDFs: TDFs remain popular among plan sponsors, but most haven't upgraded beyond traditional prepackaged, proprietary mutual funds. This is true despite the availability of other TDF options that might better serve participants of various plan sizes.

• Smaller plans are starting to adopt TDF advances: Big plans have been more likely to offer customized TDFs and options that use funds from multiple managers, but these are gradually becoming more available and attractive to smaller plans.
• Guaranteed lifetime income gaining momentum: The majority (69 percent) of plan sponsors with at least $10 million in assets find guaranteed-income TDFs appealing; 81 percent report that they are considering adding one in the next three years.

Expanding Investment Offerings: There's demand among plan sponsors to expand and improve core investment menus.

• Global bonds have room to grow. More than a quarter (26 percent) of plan sponsors report that their DC plans don't offer global bonds. Global offerings, properly designed and with exposure to multiple countries, can provide diversification and improve risk-adjusted returns.
• Non-Traditional Investments are underused. Most plans (58 percent) don't offer any nontraditional, or alternative, investments to diversify traditional stock and bond exposures. Many plans overlook real estate investment trusts (REITs) or commodities, despite their being adopted by mutual funds and exchange-traded funds (ETFs).

Automatic Enrollment Has an Edge: The number of plans using automatic enrollment keeps rising—and so do participation rates and other features associated with helping participants through retirement, not just to retirement.

Education Can Help Advisors and Consultants Stand Out: Many plan sponsors, especially those with less than $50 million in assets, need help navigating the complexity of DC plans.

• Fiduciary challenges are a pain point: Nearly two-thirds (63 percent) of plan sponsors report that reviewing fiduciary responsibilities is an important service financial advisors and consultants can provide. But 36% of plan sponsors don't provide training to ensure that all plan fiduciaries understand their responsibilities.

About the Survey
AB's DC team has conducted biennial surveys of plan sponsors since 2006. These surveys help us understand plan sponsors' perceptions and plans, enhance our DC solutions, and ultimately help plan sponsors understand how to lead participants to better savings outcomes and more comfortable retirements. Our latest plan sponsor survey was conducted online in early 2014. It included more than 1,000 respondents nationwide, representing micro plans (with assets of less than $1 million), small plans (with assets between $1 million and $9.9 million), midsize plans (with assets between $10 million and $49.9 million), large plans (with assets between $50 million and $249.9 million) and institutional plans (with assets of $250 million or more).

About AB
AB is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private wealth clients in major world markets.

As of March 31, 2015, AllianceBernstein Holding L.P. owned approximately 36.8% of the issued and outstanding AB Units and AXA, one of the largest global financial services organizations, owned an approximate 62.7% economic interest in AB.

Additional information about AB may be found on our website, www.abglobal.com.

SOURCE AllianceBernstein

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