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Insights from Callan’s DC Trends Study – Measuring Success, Collective Trusts & Retaining Assets

As we wrap up our review of the 11th annual Callan DC Trends Survey report we turn our attention to how plan sponsors are measuring success and two growing trends, the use of collective trusts and deliberate efforts to retain participant assets in plans post-separation from service.

“Retirement income adequacy”, which is how the success measure was identified in that part of the Survey, has been on a steady rise since hitting #8 in 2015"

Measuring Plan Success

In the 10 major measures of plan success, two consistently fall in the top three over the last four survey years (2014-2017): “Participant rate/plan usage” and “Contribution/savings rate.” “Investment performance” made the top five in all years while “Cost effectiveness” placed in the top four in 2015, ’16 and ’17. (It was 7th in importance in 2014).

Interestingly, in reporting what were their “primary areas of focus over the next 12 months” respondents gave “Retirement readiness” the top score with “Plan Fees” and “Participant Communication a very close 2nd and 3rd.

“Retirement income adequacy”, which is how the success measure was identified in that part of the Survey, has been on a steady rise since hitting #8 in 2015 (after placing third in 2014). This accords with our direct experience as more-and-more sponsors who have already implemented accumulation strategies like automatic enrollment and escalation to help participants build up meaningful balances turn their attention to helping participants make sound decisions about what to do with their money as they transition into retirement.

Retaining Post-Separation from Service Assets in Plans

Consistent with the focus on “retirement readiness” and “retirement income adequacy” noted above, the last three years have shown a significant increase in the number of plan sponsors who answered the question “Does your plan have a policy for retaining retiree/terminated assets?” In 2015, 43.5% of respondents said “yes.” In 2016, the number was 48.7%. 2017 saw an increase of just over 25% to 61.1% of respondents indicating they have a policy for retaining retired and/or terminated participants’ assets.

According to Callan, the rationale for seeking to retain assets is straightforward:

Many of the plans seeking to retain assets offer an institutional structure that is more cost effective than what is available in the retail market. As one plan sponsor put it: “We feel our program offers a better option for retirees, with low fees and flexible investment options.” Several others said: “Higher assets result in lower fees.”

This too accords with our direct experience working with plan sponsors. There is an increasing recognition that all parties involved can benefit from retaining participants’ assets in their retirement plan, particularly as third-party objective investment and financial planning advice becomes more common and in-plan income generating options become more-and-more transferable and price competitive.

Collective Trust Funds

We plan to devote several posts to Collective Trust Funds (CTFs or CITs) in the near future and so read this section of the Survey report with interest.

According to Callan, the use of mutual funds as the sole or main investment vehicle in retirement plans is declining. In 2011, 95% of plans offered mutual funds. In 2016 that had fallen to 84% and, in 2017, fell again to 79.5%. Use of collective trust funds, which are in many ways like mutual funds but available only to ERISA-qualified plans, rose from 43.8% of Survey respondents in 2011 to 65% in 2017.

Stable value collective trusts are very common with 27.4% of the respondents indicating they offer them. CTFs not in the stable value category were available in 56% of respondent plans.

As more and more custodians like Reliance and Wilmington Trust package money managers into CTFs, at costs often significantly lower than their separate account or mutual fund look-alike offerings, and as more and more advisory firms, consultants and associated groups also package CTFs, we expect the trend will continue, especially where minimum investment thresholds for investment do not exist.

Final Thoughts

We’ve touched on a significant portion of the Survey’s findings but by no means everything worthwhile that it contains. For your own consideration, you can access the entire report here. We welcome any thoughts and feedback you care to offer.


Ed Lynch is founder and CEO of FPG. He has worked with ERISA-qualified plan sponsors and designated fiduciaries in most aspects of plan development and maintenance since the early 1980s. 

Ed founded FPG with the mission to be a leader in the field of employee benefits and the most trusted source of information and evaluation in the retirement plan industry.

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