DC Conversations: An industry assessment of Defined Contribution Plans

Overview BMO Global Asset Management’s DC Conversations: An industry assessment provides financial advisors and retirement plan sponsors with a comprehensive array of charts and graphs designed for you to help plan sponsors evaluate their retirement plan programs against a variety of benchmarks. We hope this annual publication allows you to have better conversations around potential plan changes for your clients and prospects. Some of these better conversations may include automatic enrollment (see page 13) or investment options (see page 35) to help assist plan participants achieve better outcomes. These illustrations include a wide range of retirement plan benchmarks and a number of newly identified and ongoing industry trends – each depicted in a ready-to-present format. We encourage you to use different pages or slides from DC Conversations: An industry assessment to build better conversations with your existing and potential clients. We believe better conversations result in better outcomes. Let’s start a DC Conversation today! bmo-global-asset-management Contact us BMO-Fund ( ) bmogamviewpoints.com

Table of contents Eligibility and participation4 Automatic enrollment 13 Employer contributions 17 Participant account balances 31 Investments35 Plan expenses42 References47 Disclosures48 3

Minimum age requirements for eligibility by plan size No minimum age Plan size 20.4% ,000-4,999 5,000+ All plans 19.3% 32.1% 42.6% 57.3% 34.5% 18 years old 14.6% 35.1% 25.2% 38.5% 25.5% 28.1% 21 years old 65.0% 45.6% 40.5% 18.0% 16.4% 36.6% Other minimum age 0.0% 0.0% 2.3% 0.8% 0.9% Eligibility and participation Source: PSCA 4

Minimum months of service by contribution type Contribution typeNone (immediately eligible) 29.6% Non-matching Employee Matching 64.8% 32.1% 51.0% 3 months 1 year 17.4% 7.7% 12.4% 12.0% 6.5% 6.9% Other 6 months 46.7% 18.0% 8.0% 27.9% 4.0% 3.3% 1.8% Eligibility and participation Source: PSCA 5

Participation rate by number of participants All plans 87% 80% 81% 80% 77% 82% 83% 77% 87% 76% 75% 73% 78% 81% 77% 80% 73% 76% 78% 86% 78% 82% 78% 76% 81% 82% 90% 83% 82% 77% 82% 86% 84% 94% 87% 86% 83% 91% 5, –999 1–49 1,000–4,999 50– % Eligibility and participation Source: PSCA 6

Eligibility and participation Source: Vanguard 1 Average plan participation rate. 2 The previously reported plan-weighted participation rate for 2013 was 76%. 3 Preliminary 7

Participation rate by age and plan design <25 46% 29% 78% 67% 54% 88% 70% 62% 88% 75% 66% 90% 75% 70% 92% 70% 64% 89% All plans Voluntary enrollment Automatic enrollment 25–34 45– –44 55–64 Eligibility and participation Source: Vanguard 8

Participation rate by salary and plan design <$30,000 46% 32% 83% 65% 55% 89% 68% 62% 92% 74% 69% 95% 89% 85% 97% All plans Voluntary enrollment Automatic enrollment $30,000–$49,999 $75,000–$99,999 $50,000–$74,999 $100,000+ Eligibility and participation Source: Vanguard 9

Participation rate by years of service and plan design 0–1 57% 37% 82% 68% 56% 90% 71% 62% 92% 73% 66% 93% 76% 72% 93% All plans Voluntary enrollment Automatic enrollment 2–3 7–9 4–6 10+ Eligibility and participation Source: Vanguard 10

Participation rate by industry Construction 79% 77% 84% 78% 75% 78% 81% 79% 83% 79% 89% 93% 91% 92% 67% 61% 67% 66% 68% 70% 67% 70% 84% 80% 81% 79% 86% 85% 87% 86% 73% 77% 74% 76% 84% 83% 82% 83% 84% 83% 82% Durable goods manufacturing Health care Non-durable goods manufacturing Financial Insurance and real estate Services Technology and communications Wholesale and retail trade Utility and energy Other Eligibility and participation Source: PSCA 11

Participation rate by contribution Fixed match 82% 81% 82% 81% 80% 83% 82% 81% 82% 81% 83% 79% 84% 87% 78% 84% 80% 82% 81% 78% 73% 88% 79% 83% 78% 83% 87% 88% 75% 77% 78% 74% 77% 67% Safe harbor match Discretionary match No contribution Graded match Other contributions % Eligibility and participation Source: PSCA 12

Automatic enrollment Source: PSCA 13

Automatic enrollment Source: PSCA 14 Percentage of automatic enrollment plans by industry 52% 46% 44% 37% 49% 43% 44% 41% 39% 36% 37% 43% 39% 33% 55% 63% 54% 40% 62% 52% 60% 81% 73% 70% 72% Health care Non-durable goods manufacturing Insurance and real estate Construction and engineeringServices 56% 58% 38% 45% 41% 39% 69% 67% 48% Financial Wholesale and retail trade Utility and energy Other 40% 41% 39% 47% 29% 36% 72% 67% Durable goods manufacturingTechnology and telecommunications 34%34%

Default deferral percentage of pay <3% 9% 13% 14% 11% 12% 11% 10% 9% 7% 10% 6% 18% 15% 12% 11% 8% 9% 8% 9% 13% 16% 20% 16% 51% 47% 52% 54% 62% 58% 57% 59% 53% 12% 13% 11% 10% 8% 11% 9% % 4% 5% >5% Automatic enrollment Source: PSCA 15

Automatic enrollment Source: PSCA 16 Vesting schedules Contribution typeImmediate full vesting 41.8% Match Profit sharing 26.8% 6.2% 2-year cliff vesting 3-year graduated vesting 16.8% 3.9% 10.3% 4.8% 3-year cliff vesting 3.9% 4-year graduated vesting 2.1% 1.3% 18.9% 5-year graduated vesting Other 28.0% 16.4% 15.2% 0.7% 1.0% 6-year graduated vesting

Types of employer contribution Matching contributions only % 37% Non-matching contributions only No contribution 14% 12% 13% 43% 41% 40% 42% Both matching and non-matching contributions 4% 5% 7% 16% 40% Employer contributions Source: PSCA 17

Employer contributions Source: PSCA 18

Employer contributions Source: PSCA 19 73% 72% 71% Quarterly or monthly 5% 7% 8% 9% Annually 18% 19% 18% Other 1% 2% 1% Frequency of matching company contributions 74%74% 75%75% Payroll period

Employer contributions Source: PSCA 20 Frequency of non-matching company contributions Payroll period 21% 22% 18% 19% Quarterly or monthly 74% 73% Other 2% 4% 1% 70% 71% 6%6% 4%4% 6%6% 6%6% 8%8% Annually

Frequency of true-up contribution by plan size All plans 59% 61% 55% 57% 67% 72% 54% 57% 46% 55% 53% 62% 69% 56% 53% 61% 59% 56% 61% 57% 52% 54% 55% 5,000+ 1,000–4, –49 200–999 50–199 Employer contributions Source: PSCA 21

50% 0% 11% 4% 17% 0% 6% 33% 35% Wholesale and retail trade 2%3% 17% 0% Utility or energy 0% 0% 46% 11% 20% 0% 8% 10% 5% 0% 10% 2% 37% 6% 3% 34% 3% 8% 6% 44% 42% 41% 29% Matching contribution by industry sector Durable goods manufacturingFinancial <$0.25 $0.25 $0.25–$0.50 $0.50 $0.50–$1.00 $1.00 >$1.00 Insurance and real estate Services Employer contributions Source: PSCA 22

Employer contributions Source: PSCA

Employer contributions Source: PSCA 24

15.0%+ 7% Source: Vanguard Dispersion of employee deferral rates by percent of compensation deferred 0.1–3.9% 31% 30% 29% 28% 30% 34% 31% 22% 23% 25% 21% 22% 25% 26% 27% 24% 25% 10.0–14.9% 15% 15% 14% 15% –6.0% 6.1–9.9% Employer contributions 25

Employer contributions Source: Vanguard 26 Deferral rate by industry sector Overall 6.9% 7.7% 7.6% 7.7% 8.0% 8.2% 8.1% 7.9% 7.6% 7.8% 6.4% 7.0% 8.3% 7.0% 7.1% 7.0% 7.1% 6.4% 7.3% Agriculture, mining and construction Media, entertainment and leisure Education and health Business, professional and non-profit 6.8% 6.1% 5.8% 5.9% 6.2% 6.0% 6.8% 6.6% 6.2% Transportation, utilities and communications Manufacturing Wholesale and retail trade Finance, insurance and real estate 6.2% 6.5% 6.7% 6.6% 7.8% 8.2% 6.7% 6.6%

Deferral rate by salary < $30K 4.6% 4.7% 4.8% 4.7% 5.7% 5.6% 5.7% 5.8% 5.7% 6.9% 7.0% 7.1% 7.0% 7.8% 8.4% 8.3% 8.2% 8.3% 8.0% 8.2% 8.3% 8.4% $30K–$50K $75K–$100K $50K–$75K $100K+ Employer contributions Source: Vanguard 27

Deferral rate by age < % 4.5% 4.3% 4.2% 3.9% 3.8% 5.6% 5.5% 5.6% 5.4% 5.3% 6.3% 6.4% 6.2% 6.1% 7.3% 7.4% 7.2% 8.7% 8.8% 8.7% 8.6% 10.2% 10.1% 10.0% 10.1% 9.9% 35– –34 45–54 55– Employer contributions Source: Vanguard 28

Employer contributions Source: Vanguard 29 Deferral rate by job tenure (years) < 2 4.7% 4.9% 4.4% 6.2% 6.1% 6.2% 6.5% 6.0% 5.8% 7.0% 6.9% 6.5% 6.4% 7.2% 7.1% 7.2% 8.1% 7.7% 7.2% 7.0% 6.8% 57% 2–3 7–9 4– % 6.8% 8.0%

Deferral rate by account balance < $10K 3.7% 3.8% 3.7% 3.6% 6.1% 5.9% 5.7% 5.8% 7.1% 6.9% 7.0% 6.8% 7.1% 8.1% 7.9% 8.1% 8.3% 8.2% 8.4% 9.6% 9.5% 9.8% 9.9% 10.0% 10.2% 10.7% 10.5% 10.6% 10.5% 10.7% $25K–$50K $10K–$25K $50K–$100K $100K–$250K >$250K Employer contributions Source: Vanguard 30

Participant account balances Source: Vanguard 31 Distribution of account balances <$10,000 $10,000–$19,999 $20,000–$39,999 $40,000–$59,999 $60,000–$79,999 $80,000–$99,999 >$100,000 31% 11% 13% 8% 4% 6% 27%

Account balance by age <25 $4,141 $24,378 $9,313 $65,767 $26,681 $124,287 $50,925 $186,404 $76,618 $208,158 $72,845 $1,430 Average Median 25–34 45–54 55–64 35–44 >65 Participant account balances Source: Vanguard 32

Account balance by job tenure (years) <2 $10,567 $25,867 $11,005 $51,193 $24,583 $81,421 $41,396 $195,609 $99,379 $2,308 Average Median 2–3 7– –6 Participant account balances Source: Vanguard 33

Account balance by industry sector Agriculture, mining and construction $106,171 $37,031 $117,987 $36,237 $229,220 $27,397 $100,447 $33,795 $89,744 $84,005 $22,654 $75,327 $21,796 $69,264 $17,191 $67,367 Average Median Manufacturing Finance, insurance and real estate Transportation, utilities and communications Business, professional and nonprofit Wholesale and retail trade Media, entertainment and leisure Education and health Participant account balances Source: Vanguard 34

Default investment vehicle Stable value/money market 2% 5% 6% 5% 4% 3% 6% 7% 1% 2% 3% 5% 3% 4% 7% 11% 13% 11% 13% 12% 14% 13% 16% 7% 9% 10% 27% 20% 18% 21% 75% 72% 73% 70% 53% 57% 60% 49% Balanced Lifecycle/target date Lifestyle/target risk Other Investments Source: PSCA 35

Investments Source: PSCA 36 No. of investments available for participant direction 2.0% 1 2– –15 16–20 21– % 2.9% 25.2% 31.4% 17.6% 14.7%

Number of investments available by plan size Investments Source: PSCA 37 1– ,000–4,999 5, – –999 17

Investments Source: PSCA 38

Average retirement plan asset allocation Cash 99.0% 98.0% >99.5% 99.0% >99.5% 100% 10.0% 4.0% 20.0% 35.0% 16.0% 12.0% 16.0% 27.0% 22.0% 11.0% 45.0% 55.0% 98.0% 99.0% 100% Equity funds All <1,000 1,000–4,999 5,000+ Bond funds Balanced funds Company stock Self-directed brokerage Managed account program Number of participants Investments Source: PSCA 39

Average asset allocation Balanced stock/bond Bond - actively managed, domestic Bond - indexed, domestic 0% Self-directed brokerage window 5% 6% 5% 6% 7% 5% 7% 8% 7% 11% 2% 1% 0% 1% 0% 2% 3% 2% 5% 4% % 10% 9% 26% 24% 25% 29% 1% 2% 1% 2% 7% 8% 10% 4% 5% 4% 1% 12% 23% 2% 5% Company stock Equity - domestic index Equity - domestic managed Equity - international managed 8% Target date Real estate Sector - other Other 16% 17% 13% 12% 13% 10% 8% 10% 11% 10% 1% 10% 1% 0% 9% Investments Source: PSCA 40 4%4% 4% Bond - internationalEquity - international indexStable value Target risk 3%3% 4% 4%4% 4%4% 3%3% Cash equivalents (CD/money market) 8% 2% 6%6%

Investments Source: Vanguard 41 Average asset allocation by industry sector Agriculture, mining and construction 12%7% 3%15% Business, professional and nonprofit 9%8%7%23% Media, entertainment and leisure 8%7%11%26% Transportation, utilities and communications 13%7%8%18% Manufacturing 12%6%8%25% Education and healthcare Wholesale and retail trade 14%7%6% Finance, insurance and real estate 11%9%5% Cash/equivalent Bond funds Balanced funds Target date funds Diversified equity Company stock 32%31% 48%5% 45%9% 43%6% 25%47%3% 46%2% 27%44%2% 0% 26%26%47%9%9%10%8%8%

All-in fees by plan asset class $1M – $10M 1.27% 1.65% 1.17% 0.70% $10M – $100M >$500M 0.59% 0.89% 1.28% 0.63% 0.90% 0.35% 0.57% $100M – $500M 0.41% 0.67% 0.24% 0.82% 0.37% Median Average 90th % 10th % Plan expenses Source: Deloitte/ICI 42

All-in fees by participant count 100 – % 0.35% 0.24% Median Average 90th % 10th % 1.75% 1.16% 0.70% 500 – 999 5,000 – 9,999 10, % 1.21% 1.30% 0.74% 1.07% 0.44% 0.70% 1,000 – 4, % 0.96% 0.35% 1.09% 0.55% 0.45% 0.36% Plan expenses Source: Deloitte/ICI 43

All-in fees by participant count and average account balance All plans 0.96% 0.64% 0.35% 100 – % 0.98% 0.87% 500 – % 0.93% 0.58% 1,000 – 4, % 0.70% 0.58% 5,000 – 9, % 0.50% 0.60% 10, % 0.39% 0.29% <$25K $25K – $100K >$100K Plan expenses Source: Deloitte/ICI 44

Plan expenses Source: Deloitte/ICI 45 Median all-in fees by average account balance and plan size All plans 0.96% 0.64% 0.35% $1M – $10M 1.29% 1.03% 0.96% $10M – $100M 0.84% 0.77% 0.79% $100M – $500M 0.70% 0.55% 0.59% >$500M 0.43% 0.39% <$25K $25K – $100K >$100K 0.29%

Plan expenses Source: PSCA 46 Payment of plan expenses Plan Company Plan and company Audit fees Communication to employees Compensation of internal administrative staff Investment management fees Investment consultant fees 24.5%70.1%5.4% 27.0%53.6%19.2% 68.6%17.2%14.1% 39.9%50.0%10.2% 6.3%89.6%4.1% Other consultant fees 22.4%67.1%10.5% Legal fees 14.7%78.2%7.1% Trustee fees 43.7%45.7%10.6% Plan recordkeeping fees 47.4%34.9%17.7%

References 47 Survey data presented in this booklet, representing the most recent information available, is taken from the following surveys: The Profit Sharing Council of America’s 58th Annual Survey (“PSCA Survey”) This survey reports on the 2014 plan year experience of 592 plans with 8.8 million eligible employees and $785 billion in plan assets. The data is collected from plan sponsors invited to complete an online or hard-copy survey and represents a diverse array of plan sizes ranging from fewer than five participants to hundreds of thousands of participants. Company sizes, geographic locations, asset sizes and industries are quite diverse, as well. Vanguard How America Saves 2015 (“Vanguard Survey”) In this edition of How America Saves, the DC plans and participant behavior analysis is updated based on 2014 Vanguard record keeping data. The data in this survey is drawn from the universe of the Vanguard qualified plan clients consisting of more than 1,900 plans, 1,500 clients and more than three million participants. The data represents information reported as of December 31, The Deloitte/Investment Company Institute Defined Contribution/401(k) Fee Study (“Deloitte/ICI Fee Study”) The Investment Company Institute engaged Deloitte to conduct this survey of defined contribution plan sponsors. The survey reviewed data from ICI, as well as a Web based survey conducted by Deloitte during A total of 361 plan sponsors participated in the survey, providing detailed information regarding plan characteristics, design, demographics, products, services and associated fees. While the survey is not intended to be a statistical representation of the defined contribution/401(k) marketplace, Deloitte and ICI reported that the demographics of the plans participating in the survey appeared similar to the broader market.

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