Three-quarters (74 per cent) of U.S. defined contribution pension plan sponsors say they’ll review plan fees throughout 2024, according to a new survey by investment consulting firm Callan.
The survey, which polled more than 130 DC plan sponsors, found that half of respondents said they’re likely to move to lower-cost investment vehicles in 2024, up from 42 per cent in 2023. Nearly six in 10 plan sponsors calculated their administration DC plan fees in the past 12 months, while another 26 per cent said they did so in the last one to two years. Roughly half of respondents that conducted a fee review said they later reduced their fees.
Read: 76% of U.S. DC pension plan sponsors offering auto-enrolment: survey
More than half (58 per cent) of plan sponsors said they offer managed account services and more than eight in 10 (84 per cent) said they monitor or benchmark these services. A majority (70 per cent) of respondents said they’ve seen a significant uptick in the use of financial wellness tools.
Nearly all (94 per cent) plans said they offer a target-date fund suite and 90 per cent said they use a target-date fund as a default for non-participant-directed monies. Eight in 10 respondents reported using multiple benchmarks, indicating DC plan sponsors are seeking a more nuanced evaluation, the survey noted. Just 28 per cent said they used a mutual fund in 2023.
While more than three-quarters of respondents said they don’t offer an environmental, social and governance fund in the core fund lineup, 15 per cent said they do offer an ESG option and nine per cent said they’ve considered adding one.
The survey also found that purely passive (nine per cent) and active (one per cent) investment lineups continue to be a rarity, with the majority (91 per cent) of respondents offering a mix of active and passive investment funds.
“This year’s survey shows how certain trends that have only emerged within the last few years are persisting — trends such as retaining assets in the plan, increased valuations of indirect fees, collective trusts prevalence over mutual funds and more,” said Jamie McAllister, senior vice-president and DC consultant at Callan, in a press release.
Read: Survey finds 75% of U.S. DC plan sponsors reviewed investment fees in 2021