Ignorance Is Not Bliss for Plan Fiduciaries

by: , DCIO National Account Senior Associate, New York Life Investments

For companies that provide a defined contribution retirement benefit to their employees, continuous plan management and administration are an ongoing responsibility, even when competing demands can make them more difficult. There are a number of tasks that may be individually tailored to the plan. Since the characteristics of a retirement plan (size of financial assets, fees, service providers, participant demographics, etc.) may transform over time, plan administrators may need to take steps to address potential related changes.

On average, financial assets in defined contribution plans have been increasing; accordingly, scrutiny and regulatory changes have increased as well (see below).

Contribution Rates Will Lead to Opportunities

Trends Continue to Remain Positive for Participant Flows

Total Cash Contributions ($B)

Source: BrightScope, “Rounding the Horn: Charting a Course to the Future of Defined Contribution.”

Average Participation Rates (%)

Source: BrightScope, “Rounding the Horn: Charting a Course to the Future of Defined Contribution.”

According to PLANSPONSOR, “Total financial assets in DC plans were $6.7 trillion in 2016, up 10% from $6.1 trillion in 2014.” This is a result of many factors, but part of the reason for this growth includes innovation in plan design, such as auto-enrollment, ongoing systematic contribution increases, as well as the genesis of the qualified default investment alternative (QDIA) from the Pension Protection Act of 2006.

What does this have to do plan procedure and ongoing management? The answer is: Everything.

Economies of scale are becoming more principally relevant in the defined contribution landscape, and they have been used as a means to lower costs, which may ultimately lead to better retirement outcomes for plan participants. As assets climb upward in a defined contribution plan (whether because of regimented contributions, positive investment performance, an increase in plan participants, or otherwise), the investment share classes and recordkeeping costs may no longer be appropriate; therefore, the opportunity to negotiate lower fees may emerge.

Recognizing plan characteristics and monitoring any changes, such as increasing financial assets, may require an individual supervising the plan to pivot, administratively speaking. Having a judicious procedure to periodically benchmark fees against plan size, among other things, is a benefit not only to the plan and plan participants, but to the employer as well. Understand that increasing plan balances is a positive attribute to the overall plan’s health, in addition to being a powerful bargaining chip for plan fiduciaries to possibly reduce costs.

This article is for educational purposes only and may not be redistributed by the recipient without prior written consent from New York Life Investment Management LLC. This communication is not intended to be an offer or solicitation of investment advisory services or products.
Neither New York Life nor its agents or affiliates provide tax, legal, investment, or accounting advice. Plan sponsors should speak to their own tax, legal, or investment advisor or accounting professional regarding their specific situation. The information contained herein is general in nature and is provided solely for educational and informational purposes.

All investments are subject to market risk, including possible loss of principal. Diversification cannot assure a profit or protect against loss in a declining market.

Opinions expressed are current opinions as of the date appearing in this material only. The information and opinions contained herein are for general information use only. MainStay Investments does not guarantee their accuracy or completeness, nor does MainStay Investments assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. There can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Past performance is no guarantee of future results.

MainStay Investments® is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC

Prepared for an Institutional Audience.


Jeffrey Zielinski, CRPC®, CRPS®

DCIO National Account Senior Associate, New York Life Investments

Jeffrey Zielinski is a DCIO National Account Senior Associate helping cover our home office and field relationships. He joined New York Life Investments in 2016. Previously, Jeff’s experience includes John Hancock RPS (Formerly New York Life RPS), ADP Retirement Services, and

Full Bio

Leave a Reply

Your e-mail address will not be published.