Survey 44 Percent of DC Plans Expect to Replace Options in ’09

By Staff Report

Feb. 3, 2009

A Callan survey released Monday, February 2, showed that 44 percent of private and public defined-contribution plans expect to replace an investment option for performance-related reasons in 2009, up from 39 percent that did so last year.

Plan officials also said fund and manager performance and due diligence are their primary focuses for 2009, according to Callan Associates’ “2009 Defined Contribution Trends Survey: Impact of Recent Market Volatility on DC Plans.”

Target-date funds were used as the default investment option in 59 percent of plans surveyed, up from 36.4 percent in 2007 and 32.5 percent in 2006.

Also, 76 percent of those surveyed said they’d be increasing the frequency of investment committee meetings in light of market volatility.

“There is a real focus by plan sponsors on making sure their ‘I’s are dotted and ‘T’s are crossed in their plans,” said Lori Lucas, defined-contribution leader at Callan Associates. “Given the events towards the end of last year, sponsors are looking to see if plans need to make changes in their due diligence procedures and in their investment funds. Conversely, with all the energy being spent on nuts-and-bolts due diligence, there is going to be a lot less emphasis on plan features in 2009.”

The online survey was conducted in late November and early December, and results incorporate responses from 107 companies; 80 percent of respondents offered 401(k) plans, while other respondents provided profit-sharing, 457 and 403(b) plans. The majority of plans had more than $100 million in assets and nearly one-third had assets of $1 billion or more.

(For more, read “Emanuel’s Memo May Put DOL Advice Rule at Risk.”)

Filed by John D’Antona Jr. of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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