Cowden Associates survey finds significant changes in investment decision-making process

Significantly more senior executives are taking a direct role in decisions regarding their organization’s 401(k) plans than in the past, according to Cowden Associates, Inc.’s Second Annual Tri-State Defined Contribution Plan Sponsor Survey.

Of the respondents to this year’s survey, 94 percent indicated that their senior executives are involved in the investment decision-making process, compared with 30 percent in 2007.

More than 125 employers throughout the tri-state region participated in this year’s survey, which was conducted during March and April, and provided information on their location, size, total plan assets, type of organization, and eligibility for and participation in the plan.

"Recent legislation, including the Pension Protection Act and the Supreme Court’s ruling that individual’s can sue defined-contribution plan sponsors who mismanage their funds, has been a real wake-up call for plan sponsors,” said Jim Bartoszewicz, executive vice president of Defined Contribution & Investment Advisory Services. “In just one year, we’re seeing a significant shift in the way defined-contribution plans are managed.”

According to the survey, more senior managers are serving on their Investment/Retirement Committees. In doing so, they are taking responsibility for selecting and monitoring the investments offered in their plans, participating in any plan-design changes and overseeing the plan service providers and their fees – all fiduciary responsibilities of such committees.

Still, there are areas in which plan sponsors need considerable improvement in overseeing their defined-contribution plans, according to the survey results. Although the number of respondents who either did not have an Investment Policy Statement (IPS) or did not know what their IPS contained dropped from 52 percent in 2007 to 41 percent in 2008, 25 percent of respondents reported not having an IPS. An IPS provides the general investment goals and objectives of a retirement plan.

Results of the survey also show an increase in the number of defined-contribution plan sponsors who implemented an automatic enrollment program, up from 16 percent in 2007 to 25 percent in 2008. Automatic annual increases were more prevalent in 2008, up from 7 percent in 2007 to 10 percent in 2008.

“One clear goal of the Pension Protection Act was to increase the savings rate in defined-contribution plans by encouraging plan sponsors to automatically enroll employees in their plan and to automatically increase the participant’s deferral rates as a way to get more employees in the plan and then get them to save more,” Bartoszewicz said. “We’re seeing a modest increase in automatic enrollment and automatic increase plans.”

In its second year, Cowden Associate’s survey provides an accurate baseline to measure improvement and trends in 401(k), 403(b) and 457 plan sponsorship and participation in the Eastern Ohio, Western Pennsylvania and Northern West Virginia region. It also illustrates where the greatest needs are to achieve strong retirement plans.

Journalists can obtain a comprehensive copy of survey results by contacting Jason Snyder at 724-935-7580 or jason.snyder@wordwritepr.com.