Large 401(k) Plans Don’t Use Recordkeepers’ Target Date Funds: Survey

Larger 401(k) plans are more likely to keep their recordkeeping and asset management separate, according to a study.

The report from SEI Industries Co., suggests that smaller plans are more likely to use their recordkeepers’ proprietary target-date funds.

According to Benefits Pro:

More than two-thirds of plan sponsors with more than $1 billion in plan assets are using target-date funds from a provider other than the plan’s recordkeeper, according to a survey of 231 plans with assets between $25 million and $5 billion: 47 of those plans are SEI clients.

For all plan sizes surveyed by Oaks, Pennsylvania-baed SEI, which does not have a recordkeeping business, 46 percent are using a separate asset manager’s target-date funds.

Plans in the smallest size segment are most likely to use their recordkeeper’s target-date funds. For plans with less than $100 million in assets, 68 percent use their recordkeepers’ target-date funds; about half of midsize plans with $100 million to $300 million in assets use their recordkeeper’s target-date funds; and 61 percent of large plans with assets between $300 million and $1 billion are still using their recordkeeper’s proprietary target-date funds.

Of all plan sponsors, 62 percent said it was a good idea to separate asset management services from recordkeeping. Among mega sponsors, 38 percent said sponsors should not be offering their recordkeepers’ target-date funds.

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