Retirement plan sponsors are dealingwith some challenging problems, says a survey from Callan.

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The 2018 Defined Contribution Survey by SanFrancisco-based Callan has been released. Callan is a consultant tosponsors of defined contribution plans that advises on over$2 trillion across its client portfolio.

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Callan's survey—the 11th installment—draws data from152 401(k), 403(b), and government sponsored 457 plans. More than90 percent hold assets exceeding $100 million; and 60 percent aremega plans, with more than $1 billion in assets.

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Here is a look at 10 key findings from the 50-page report, whichexamines the gamut of issues plan sponsors face, from plan designand deferral rates to compliance and plan communication trends.

1. Education vs. advice under DOL fiduciary rule

The fiduciary rule's impartial conduct standards wereimplemented in June of 2017. While the standards require afiduciary best interest standard on all advice to qualifiedretirement accounts, the rule's warranty and disclosurerequirements have been delayed until July of 2019, and may still besubstantially revised.

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Still, the rule has implications for service providers to DCplans and plan sponsors, perhaps most specifically to howparticipants receive rollover advice.

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The larger fiduciary rule included an education carve-out, whichwould allow plan providers to give general information toparticipants without rising to the level of fiduciary advice. Manystakeholders raised concerns during the rule-making process thatthe carve-out was vague.

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For most plan activities, Callan's survey found that planrecordkeepers will assume an educational role, as opposed to takingon full fiduciary status advising on participants' specificactions.

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On the question of rollovers, 71 percent of sponsors saidrecordkeepers will be taking an educational role, while 27 percentsaid their service provider will be assuming full fiduciaryresponsibility, allowing direct investment recommendations.

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Nearly 13 percent of sponsors said they were unsure of theirrecordkeeper's position under the rule.

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On contribution rate changes, 70 percent of sponsors said theirparticipants will only have access to education from recordkeepers;25 percent said participants will have access to fiduciary advicethrough recordkeepers; another 12 percent of sponsors are stillunsure.

2. Plan sponsors' monitoring requirements under fiduciaryrule

Under ERISA, plan sponsors are fiduciaries and are legallyrequired to monitor the actions of service providers.

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Callan found that plan sponsors are largely unsure of what thefiduciary rule will mean for their monitoring requirements.

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“There is no clear majority practice to monitor these (recordkeeper) services,” says Callan. The most prevalent monitoringrequirements were reviewing the advice software of serviceproviders, receiving reports on advice interactions, and reviewingsamples of written communications.

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Almost 43 percent of sponsors said they don't know what theyplan to do to monitor recordkeepers going forward.

3. Auto-default rates hit highest levels

The average deferral rate forautomatically enrolled participants was 4.6 percent in 2017, thehighest ever in Callan's survey. In 2015, the average rate was 4percent.

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The use of auto enrollment has remained steady. Most sponsorsuse the feature for new hires, but more are re-enrolling existingemployees—25 percent of employers are using the feature now forexisting employees.

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About 77 percent of plans that don't use auto-enrollment plan toimplement the feature in 2018.

4. Auto-escalation in use

Four-fifths of private sector employersuse automatic escalation along with auto-enrollment. That rate hasremained steady. But more sponsors are allowing participants to optout of automatic contribution increases—71 percent said they nowhave the feature.

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Of those that don't use auto-escalation, 70 percent said theywere likely to in 2018.

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5. Use of recordkeepers' proprietary TDFs continues todrop

In 2012, more than half of sponsorsreported using their record keeper's proprietary target-date fundsfor QDIA investments.

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That trend has been on the wane. Last year, only 23 percent ofsponsors used proprietary TDFs.

6. Non-proprietary CITs more common than mutual fund TDFs

Fee-conscious sponsors are opting for cheaper collectiveinvestment trust TDFs over traditional mutual fund TDFs. Sponsorsusing non-proprietary CITs have more than doubled since 2012. In2017, 27 percent of sponsors used a CIT, compared to 25 percentthat used a non-proprietary TDF mutual fund.

7. Fee monitoring

About 85 percent of sponsors calculated their plans' all-in feesin 2017. Plan consultants and advisers offered the data 63 percentof the time.

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And 77 percent of plans benchmarked their fees to other plans,most commonly via consultants' databases.

8. Use of annuities

About 9 percent of sponsors offered an in-plan annuity option,double the number in 2015.

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Sponsors cited slack demand, cost, and a lack of clarity onfiduciary implications for not using annuities.

9. Participants picking up fee tab

In 97.5 percent of the plans Callan examined, participants payfor fees either partially or entirely. Only 1.7 percent of sponsorspaid plan fees.

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The use of revenue-sharing agreements continued to decline lastyear. About 27 percent of plans had some revenue sharing, down from38 percent in 2016.

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Flat per-participant fees were used by 55 percent of plans,compared to 42 percent in 2016.

10. 2018 priorities

Retirement readiness is sponsors' top priority in 2018.Reviewing plans' design, fees, and compliance with Labor'sfiduciary rule are also among their priorities.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.