Plan sponsors' top concern shifts from reducing plan costs to helping employees prepare for retirement

Ninth Annual Fidelity® Plan Sponsor Attitudes Study Finds:
- 82 Percent of Plan Sponsors Reported Changes in Plan Design, with 29 Percent Implementing Automatic Increase and 26 Percent Implementing Automatic Enrollment
- 83 Percent of Plan Sponsors Made Changes to Investment Menus, with 1/3 Replacing an Underperforming Fun
- 92 Percent of Plan Sponsors use Plan Advisors and Fewer Plan Sponsors are Actively Looking to Switch Their Plan Advisors Than in Previous Years

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BOSTON — Fidelity Investments® today announced the results of its ninth annual Plan Sponsor Attitudes Study, which revealed that the top concern of plan sponsors was whether the plan was effectively preparing employees for retirement financially (33 percent), whereas in 2017 the main focus was on reducing business costs related to the plan (32 percent). To help employees achieve their savings goals, many sponsors are making changes to plan design (82 percent) and investment menus (83 percent). The study, which began in 2008, surveyed employers who offer retirement plans that use a wide variety of record keepers and have at least 25 participants and $10 million in plan assets.1

Additionally, more plans than ever (92 percent) use plan advisors, and the number of plan sponsors actively looking to switch their plan advisors (22 percent this year), while historically high, is down considerably from an all-time high of 38 percent last year. While last year's potential regulatory changes were top of mind for plan sponsors, this year, the top reason they hired advisors was to help improve their plans (27 percent versus seven percent in 2017).

"We view the increased focus on driving plan participants' engagement and savings rates as a positive shift," said Jordan Burgess, head of specialist field sales overseeing defined contribution investment only (DCIO) sales at Fidelity Institutional Asset Management®. "Plan sponsors can work with advisors to identify ways to boost retirement readiness for plan participants, in addition to leveraging them as a resource to manage the challenges and costs of the plan"

As plan sponsors continue making changes to investment menus and plan design, the reasoning behind those changes mirrors their overall focus on retirement preparedness for participants. The reason for most plan design changes was to increase employee participation or savings rates. About one in three plan sponsors reported that they added or changed a matching contribution (39 percent versus 25 percent in 2017), making that the top change to plan design this year. Fifty-six percent of plan sponsors made that change to increase employee participation and 47 percent did so to increase savings rates.

The top changes to investment menus included replacing an underperforming fund (33 percent), adding an index fund (28 percent) and adding a lower-cost class of shares (25 percent). Another emerging trend for plan sponsors was the decision to add a managed account program, with 23 percent of plan sponsors reporting that change.

Affecting Participant Outcomes

Plan sponsors remain satisfied with their plan advisors (70 percent). Despite this stability, it's important that advisors look for opportunities to stay competitive against their peers. Given plan sponsors' focus on retirement readiness, plan advisors can add value by sharing knowledge and opportunities to help plan participants reach their goals in retirement:

  • Auto-enrollment, which ranked as the top plan design change last year at 42 percent, fell to 26 percent. With only about half of plans using auto-enrollment (51 percent), plan sponsors could be missing opportunities to encourage employees to save more. Auto-enrollment can improve participation rates from an average of 50 percent to 87 percent. Unfortunately, six in 10 finance and HR associates participating in the survey reported concern that employees would not respond well to being automatically enrolled. However, 87 percent of employees stayed in plans with an auto-enrollment default of 5 percent or higher, and 68 percent reported being "very satisfied" with the feature. Encouragingly, 23 percent of plans increased the auto-enrollment deferral rate and 29 percent added an automatic increase program – important steps that can help employees reach Fidelity's recommended savings rate of 15 percent of their pretax income
  • Retirement income goals are on the minds of plan sponsors – seven in 10 reported setting a goal for retirement income. Fidelity suggests 45 percent is a reasonable income replacement goal to help maintain a pre-retirement lifestyle throughout retirement, but 37 percent of plan sponsors reported a goal of less than 40 percent. Plan advisors should consider making sure plan sponsors have goals in place as well as discuss an appropriate framework for setting these goals, such as target date solutions that are aligned with their plans' income replacement goals.
  • Health Savings Accounts (HSAs) could increase firms' resources available to retirement plan participants. Sixty-five percent of plan sponsors stated that retirement plans compete for funding with health and other benefits. Sponsors considered health care to be the most important benefit for the company – even before retirement benefits. And, more than half (54 percent) of plan sponsors reported reducing or deferring spending on other benefits due to higher health care costs. However, 25 percent of plan sponsors still do not offer HSAs. About one-third (32 percent) of plan sponsors using an HSA said its primary value to the company is to lower health insurance costs through high deductible plans. Importantly, saving on health care costs could enable sponsors to allocate more resources to retirement plans.

Additional information on the survey as well as resources and tools – including fund analytics and details on investment options – can be found at go.fidelity.com/attitudes.

Fidelity Institutional Asset Management®, Defined Contribution Investment Only (DCIO)

Fidelity Institutional Asset Management® is a leading provider of investment management and retirement services to defined contribution professionals nationwide, supporting advisors, recordkeepers, third-party administrators and plan sponsors in a collective effort to help participants achieve better retirement outcomes. As a retirement leader, Fidelity has deep knowledge of plans and participant behaviors. The firm combines this knowledge with a legacy of asset management —62 percent of Fidelity's $2.5 trillion in managed assets are retirement assets as of June 30, 2018— to become a key manager in the investment-only arena with about $87.2 billion in total DCIO assets.

Plan Sponsor Attitudes Survey: Methodology

The 2018 Plan Sponsor Attitudes Survey was conducted in collaboration with Harris Insights and Analytics, an independent market research company, which conducted an online survey of 1,124 plan sponsors on behalf of Fidelity during the month of February 2018. Fidelity Investments was not identified as the survey sponsor. Respondents were identified as the primary person responsible for managing their organization's 401(k) plan. All plan sponsors confirmed their plans represented at least 25 participants and had at least $10 million in plan assets. Though the survey is broad in scope the experiences of the plan sponsors participating in the survey may not be representative of all plan sponsors. Previous Fidelity surveys were conducted in 2008, 2010, 2012, 2013, 2014, 2015, 2016 and 2017.

About Fidelity Investments

Fidelity's mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $7.0 trillion, including managed assets of $2.5 trillion as of June 30, 2018, we focus on meeting the unique needs of a diverse set of customers: helping more than 27 million people invest their own life savings, 23,000 businesses manage employee benefit programs, as well as providing more than 12,500 financial advisory firms with investment and technology solutions to invest their own clients' money. Privately held for 70 years, Fidelity employs more than 40,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

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1. Data presented here is based on the full 2018 survey results. Other published or historical data may reflect different values based on the criteria used, such as plan asset level or participant count.
2. Building Futures, data as of December 31, 2017. Based on Fidelity analysis of 22,400 corporate defined contribution (DC) plans (including advisor-sold DC) and 15.3 million participants as of December 31, 2017. Fidelity's recordkept database of DC plans excludes tax-exempt plans, nonqualified plans, and the FMR Co. plan.
The information contained herein is general in nature, is provided for informational purposes only and is not legal advice. Unless otherwise disclosed to you, any investment or management recommendation in this document is not meant to be impartial investment advice or advice in a fiduciary capacity, is intended to be educational and is not tailored to the investment needs of any specific individual. Fidelity and its representatives have a financial interest in any investment alternatives or transactions described in this document. Fidelity receives compensation from Fidelity funds and products, certain third-party funds and products, and certain investment services. The compensation that is received, either directly or indirectly, by Fidelity may vary based on such funds, products and services, which can create a conflict of interest for Fidelity and its representatives. Fiduciaries are solely responsible for exercising independent judgment in evaluating any transaction(s) and are assumed to be capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies.
The third-party trademarks and service marks are the property of their respective owners. All other trademarks and service marks are the property of FMR LLC or an affiliated company.
Products and services provided through Fidelity Institutional Asset Management® (FIAM®) to investment professionals, plan sponsors and institutional investors by Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917.
Fidelity Clearing & Custody Solutions® provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC. 200 Seaport Boulevard, Boston, MA 02210.
© 2018 FMR LLC. All rights reserved.
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