New plan sponsor data from Cogent Syndicated reveals that large and very large plans have shorter plan provider tenure while cybersecurity threats dominate concerns.
LIVONIA, Mich., June 25, 2024 (GLOBE NEWSWIRE) — New Cogent Syndicate Among 401(k) plan sponsors who changed recordkeepers in the past two years, mergers and acquisitions (M&A) and healthy business growth emerged as the top drivers for recent plan provider changes, highlighting some new challenges in today's marketplace, according to a report from Escalent.
While quality of service to participants was the top driver for switching plan providers last year, recordkeepers should pay attention to multiple factors, including quality of service to plan sponsors, organizational mergers and acquisitions, and growth in employee numbers and plan assets. These are some of the survey's key findings. Escalent2024 Retirement Plan® report.
“While existing plan sponsors may be tempted to believe that corporate growth is purely positive, given the potential for increased plan assets and participation, they should be cautious,” said Sonia Davis, lead report author and senior product director at Cogent Syndicated. “Healthy growth and M&A activity could prompt plan sponsors to reevaluate and enhance their retirement plan benefit offerings, in the spirit of being fair to all parties.”
Indeed, among large and very large plans, defined as plans with at least $100 million in assets, the average tenure of plan sponsors has been declining, and there are signs that challengers are beginning to have success dislodging incumbents within this group. The average tenure of record-holders in large and very large plans is 7.5 years, down from 8.4 years in 2022.
Meanwhile, for the first time in the survey's history, cybersecurity threats/data breaches have surpassed underperformance of plan investment options as the top concern plan sponsors have regarding the administration of their organization's 401(k) plans. Concerns about cybersecurity have increased significantly, from 40% in 2022 to 47% in 2024. Meanwhile, worries about underperformance have eased somewhat, from 57% in 2022 to 45% this year.
“Cybersecurity threats were previously a top concern for large and very large plans, but are now the top concern across all plan size groups. Providers must be very clear about their data security and cyber risk management practices,” Davis said. “With mergers, acquisitions and cybersecurity concerns taking center stage, it is imperative that recordkeepers clearly communicate their services. Maintaining high quality service and security standards will position recordkeepers to capture new opportunities and maintain relationships with existing customers.”
About Retirement Planscape®
Cogent Syndicated, a division of Escalent, conducted an online survey of a representative cross-section of 1,391 401(k) plan sponsors from February 14 to March 12, 2024. Survey participants were required to have joint or sole responsibility for plan design, administration, plan provider selection and evaluation, or evaluation and selection of investment managers/investment options for their 401(k) plans. In determining the sample frame for this study, Cogent utilized recent Form 5500 filings managed by Judy Diamond Associates, an ALM. To ensure that the study population was representative of the entire population of 401(k) plan sponsors, quotas were established during the data collection phase around key firm characteristic variables, including total plan assets, number of plan participants, industry, and region. Minimal weighting was applied to adjust for intentional deviations from the actual market distribution. The data has a margin of error of ±2.63% at the 95% confidence level. Escalent will provide the exact wording of the survey questions upon request.
About Escalent
Escalent is an award-winning data analytics and advisory firm specializing in industries facing disruption and business transformation. A catalyst for progress for over 40 years, we accelerate growth by creating a seamless flow between primary, secondary, syndicated and internal business data and providing consulting and advisory services from insight to implementation. With the acquisition of C Space and Hall & Partners in April 2023, we now have 2,000 team members. Headquartered in Livonia, Michigan, Escalent has offices across the US, Australia, Canada, China, India, Ireland, Philippines, Singapore, South Africa, UAE and the UK. Learn how we're helping shape the brands that are reshaping the world at escalent.co.
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