Employers likely to cut investment choicesNews added by Benefits Pro on June 18, 2014

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Joined: September 07, 2011

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By Lisa Barron

The majority of defined contribution plan sponsors offer three to five times more funds in their investment options than participants use, according to a survey by SEI.

Although retirement investors on average use less than five funds while participating in a DC plan, most are able to choose from a lineup with anywhere from 16 to 36 funds to consider, SEI found.

The poll of 25 sponsors, representing DC plans ranging in size from $25 million to more than $5 billion, was conducted in February.

More than half, 57 percent, of the respondents said the goal of their DC plan is to provide the primary source of retirement income for participants. But as they continue to look for ways to improve the retirement outcomes, many are looking at simplifying their investment plans.

One in five plan sponsors surveyed said they plan to consolidate the number of funds in their core lineup within the next 18 months.

In addition, 32 percent said they plan to add exposure to non-traditional asset classes as a component within broader, multi-asset funds.

At the same time, due diligence requirements are driving more sponsors to look at delegating investment management selection and oversight to a discretionary 3(38) provider when making these changes.

Nearly half, 42 percent, of the sponsors polled said they would consider doing so, and of that group, about 40 percent said they would delegate the entire investment lineup to outside oversight.

SEI also said that plan sponsors are divided on whether a looming retirement crisis will negatively impact their respective companies through an aging workforce and higher employment costs.

Originally published on BenefitsPro.com
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