2024 MFS DC Plan Sponsor Survey: Investment Menu and Plan Design Changes

2024 MFS DC Plan Sponsor Survey: Investment Menu and Plan Design Changes

 

Jeri Savage and Kristen Colvin discuss key survey findings on QDIAs, capital preservation options and investment menu changes, highlighting trends shaping DC plan design.

 

 

Kristen: In the 2024 MFS DC Plan Sponsor Survey, our third key theme focuses on the investment menu and plan design. Jeri, what are some of the items we researched when it comes to these topics?

 

Jeri: Kristen, when it comes to the investment menu and plan design, we focused on three main things. First, we asked a number of questions around the QDIA to better understand how sponsors think about the default option in their plan. Next we asked about capital preservation options. And then third, and similar to last year, we asked about changes to the investment menu and investment structure. This year we expanded this topic to capture changes being considering or what’s been made to the QDIA, to various components of the core menu (both like last year) and then also to include company stock and brokerage windows. Within the core menu, we also asked about alternatives this year.

 

Kristen: So a lot different information as it relates to investment.  Could you share a little bit

more about QDIA and capital preservation learnings.

 

Jeri: 87% of sponsors tell us their QDIA option is a target date fund. 63% of sponsors this year tell us they are offering managed accounts (56% as a service that participants can opt into and 7% as the QDIA). We asked some detailed questions around the types of target date funds offered and found a mix of vehicle type, a mix of management style and a mix of glidepaths that glide to or through retirement.

 

Then furthermore, we asked sponsors to tell us about the most important characteristics of target date funds that they believe are most important to employees.

 

56% told us it was ease of use – being able to set it and forget it. The numbers drop off after that and we see 14% say long-term investment performance, 11% say price, and then numbers further drop off below 5%. We had a similar question in our global retirement survey of participants – and interestingly they gave long-term performance as their top answer, and only 19% of participants said ease of use.

 

Now let’s turn to capital preservation next.

We asked sponsors what they use as a capital preservation option and found 53% use stable value, 28% use both money market and stable value and 17% use money market.

 

For those stable value users, we asked them what they view the role of stable value to be. 81% tell us it is a broad capital preservation option that can be used in both the accumulation and decumulation stages. So perhaps there is a little bit more we can explore here that ties to the topic of retirement income.

 

Kristen: Another area that you mentioned we asked some questions on was the investment lineup and investment menu. What changes have occurred or what changes are sponsors contemplating based on the results 

 

Jeri: Kristen, we have some good information from this question this year. Like I said earlier, this year we expanded this topic to capture changes being considered or what’s been made to the QDIA, to various components of the core menu, as well as to sponsors’ thoughts on company stock, brokerage windows and alternatives.

 

Sponsors were able to tell us if they’ve added options, if they’ve removed or reduced options or if they’ve replaced managers in certain categories. They were also able to indicate if they are considering future changes over the next 12-18 months. So what did we find?

 

First, action in the QDIA space is lower than action across asset categories in the core menu. Only 10% are contemplating near-term changes. In the core menu, the most activity seems to be in the equity portion of the menu, driven by 11% adding options, 11% replacing managers and 5% reducing or removing options – plus an additional 15% indicating future changes. So again, new this year, we asked about alternatives and 15% indicate they are considering them near-term – perhaps because of what’s seen as a more accommodative stance under the new administration.

 

Finally, in response to sponsor feedback from last year’s survey, we include company stock and brokerage windows in these results. Sponsors this year told us they have added to the brokerage window and another 10% are considering future changes. Not many have indicated changes to company stock – which seems right, as not every plan has company stock in their lineup.

 

Kristen: A lot of information around actions that sponsors are taking or considering taking in the investment realm.  To learn more or to see the full results, please visit mfs.com.  

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