PLANADVISER - March/April 2019 - 8

data points
Managed Accounts as the QDIA
Advisers make a difference in some cases, but not in all
N
early seven out of 10 retirement
plans that automatically enroll
participants, 69.2%, turn to
target-date funds (TDFs) as the qualified
default
investment
alternative
(QDIA)-be
it an actively managed,
indexed or custom TDF (33.5%, 25.0% or
10.7%, respectively)-according to the
2018 PLANSPONSOR Defined Contribution
(DC) Benchmarking Report. Less
than 10%-7.9%-use professionally
managed accounts as the QDIA.
While the incidence of managed
accounts as the default investment in
plans with automatic enrollment is
quite low, we decided to turn to the
2018 PLANSPONSOR DC Survey to see
if the presence of a retirement plan
adviser beneficially influenced these
plans. The results were mixed.
When an adviser was involved,
53.45% of plans with managed accounts
as the QDIA had a default deferral rate
above 4%. This is noticeably higher than
the 47.61% of adviser-led plans where
the QDIA was not managed accounts.
The findings on deferrals were similarly
positive when managed accounts'
As to savings, using
a 3(38) adviser
seemed to most
benefit managedaccount-QDIA
plans,
which had an
average balance of
$106,329, compared
with $97,523 for
plans with other
types of QDIAs.
advisers were 3(21) fiduciaries: Deferrals
were nearly 5 percentage points
higher (55.00% vs. 50.13%) than when a
3(21) oversaw a non-managed-account
QDIA. But when the adviser was a 3(38)
fiduciary, the findings reversed: 45.91%
of the plans using something besides
Default Deferral >4%
n Managed account QDIAs n Other types of QDIAs
66.7%
53.5%
47.6%
33.3%
45.9%
55.0%
50.1%
46.3%
44.3%
45.5% 44.2%
57.1%
managed accounts had a default deferral
rate north of 4% vs. 33.33% of plans
with managed accounts.
The average deferral rates were
also mixed when it came to adviserled
plans that use managed accounts.
Overall, the deferral rate in these plans
was 7.31% vs. 6.90% in the rest. The
3(38)-advised managed-account plans
won out over other 3(38)-advised plans,
with deferral rates of 8.07% vs. 6.68%,
respectively. Yet, when the adviser was
a 3(21) fiduciary, deferral rates were
higher in the non-managed-account
plans: 7.15% vs. 6.82%.
As to savings, using a 3(38) adviser
seemed to most benefit managedaccount-QDIA
plans, which had an
average balance of $106,329, compared
with $97,523 for plans with other types
of QDIAs. Balances were also slightly
higher for the managed account QDIAs
compared with the others when a
3(21) adviser was present: $114,342 vs.
$112,553. But when the adviser was
not a fiduciary, the figures favored
the other QDIA types: $100,197 vs.
$106,410. -Lee Barney
With adviser
3(38) fiduciary
Source: BrightScope Defined Contribution Plan Database
3(21) fiduciary
Not a fiduciary
Don't know
No adviser
Like PLANADVISER, BrightScope is owned by Institutional Shareholder Services Inc.
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