PLANADVISER - September/October 2018 - 6

data points
Ups, Downs of Balanced Funds
Just 8.9% of plans employ these funds as their default investment
W
hen retirement plan sponsors
were asked last year in
the PLANSPONSOR Defined
Contribution (DC) Survey what they
thought was the best qualified default
investment alternative (QDIA) option
for their employee population, 56.7%
said a target-date fund (TDF). Only
8.4% cited a balanced fund, and 8.8% a
managed account.
Yet, while the percentage that chose
balanced fund is consistent with the
percentage using one-8.9%-overall
use fell from a high, in 2015, of 11.3%.
Balanced funds have the simplest
implementation of all QDIA options, as
the plan sponsor can default all participants
into the same fund. Moreover,
they do not require the consideration
of age or potential retirement date as
do target-date funds, or additional data
points as do managed accounts. From
a due diligence perspective, finding a
benchmark against which to measure
a balanced fund may be also the
easiest. However, the funds have yet to
enter into wide use.
Perhaps interesting to note, though,
is that these funds as the QDIA are far
more common among micro and small
plans
than among large and mega
plans. In fact, the highest take-up rate
is among micro plans. In 2013, 19.9%
The balanced
fund has
the simplest
implementation
of all QDIA options,
as the plan sponsor
can default all
participants into
the same fund.
2011
l Target-date fund
l Balanced fund
l Managed account
l Not sure
l Other
43.5%
14.8%
7.2%
26.1%
8.5%
2013
50%
18.7%
8.48%
19.6%
3.8%
Source: 2017 PLANSPONSOR Defined Contribution Survey
of them used a balanced fund as their
QDIA, although that fell to 14.2% last
year. Small plans saw a high of 14.1%
using a balanced fund in 2015; that
declined to 10.8% last year.
By comparison, only 6.7% of midsize
plans used a balanced fund as their
QDIA in 2011. That increased to 11.9%
in 2013 but then fell to 9.5% in 2015 and
7.6% in 2017.
In large and mega plans, balanced
fund use in that capacity dropped off
considerably. Just 2.1% of large plans
used one in 2011; that rose to 6.6% in
2013, but fell to 6.3% in 2015 and 5.8%
in 2017. -Lee Barney
2015
56.2%
13.3%
8.2%
19.9%
2.3%
2017
56.7%
8.4%
8.8%
25.2%
0.1%
5%
Balanced Fund Use as the QDIA
20%
15%
10%
Small
Micro
Overall
Midsize
Large
Mega
2011
2013
2015
Which of The Following Is the Best QDIA Option
For Your Employee Population?
2017
6 | planadviser.com September-October 2018

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PLANADVISER - September/October 2018

Table of Contents for the Digital Edition of PLANADVISER - September/October 2018

Valuable Partnerships
Pension Risk Transfer
How to Explain CITs to Sponsors
Open MEP Opportunities
Appropriate Benchmarking
Investigations Intensify
PLANADVISER - September/October 2018 - Cover1
PLANADVISER - September/October 2018 - Cover2
PLANADVISER - September/October 2018 - 1
PLANADVISER - September/October 2018 - 2
PLANADVISER - September/October 2018 - 3
PLANADVISER - September/October 2018 - 4
PLANADVISER - September/October 2018 - 5
PLANADVISER - September/October 2018 - 6
PLANADVISER - September/October 2018 - 7
PLANADVISER - September/October 2018 - 8
PLANADVISER - September/October 2018 - 9
PLANADVISER - September/October 2018 - 10
PLANADVISER - September/October 2018 - 11
PLANADVISER - September/October 2018 - 12
PLANADVISER - September/October 2018 - 13
PLANADVISER - September/October 2018 - 14
PLANADVISER - September/October 2018 - 15
PLANADVISER - September/October 2018 - 16
PLANADVISER - September/October 2018 - 17
PLANADVISER - September/October 2018 - 18
PLANADVISER - September/October 2018 - 19
PLANADVISER - September/October 2018 - 20
PLANADVISER - September/October 2018 - 21
PLANADVISER - September/October 2018 - 22
PLANADVISER - September/October 2018 - 23
PLANADVISER - September/October 2018 - 24
PLANADVISER - September/October 2018 - 25
PLANADVISER - September/October 2018 - 26
PLANADVISER - September/October 2018 - 27
PLANADVISER - September/October 2018 - 28
PLANADVISER - September/October 2018 - 29
PLANADVISER - September/October 2018 - 30
PLANADVISER - September/October 2018 - 31
PLANADVISER - September/October 2018 - 32
PLANADVISER - September/October 2018 - 33
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PLANADVISER - September/October 2018 - 35
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PLANADVISER - September/October 2018 - 37
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PLANADVISER - September/October 2018 - 39
PLANADVISER - September/October 2018 - 40
PLANADVISER - September/October 2018 - 41
PLANADVISER - September/October 2018 - 42
PLANADVISER - September/October 2018 - 43
PLANADVISER - September/October 2018 - 44
PLANADVISER - September/October 2018 - 45
PLANADVISER - September/October 2018 - 46
PLANADVISER - September/October 2018 - 47
PLANADVISER - September/October 2018 - Valuable Partnerships
PLANADVISER - September/October 2018 - 49
PLANADVISER - September/October 2018 - Pension Risk Transfer
PLANADVISER - September/October 2018 - 51
PLANADVISER - September/October 2018 - How to Explain CITs to Sponsors
PLANADVISER - September/October 2018 - 53
PLANADVISER - September/October 2018 - Open MEP Opportunities
PLANADVISER - September/October 2018 - Appropriate Benchmarking
PLANADVISER - September/October 2018 - Investigations Intensify
PLANADVISER - September/October 2018 - Cover3
PLANADVISER - September/October 2018 - Cover4
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