How Many Fund Choices in a Defined Contribution Pension Plan ? www.proteusperformance.com
Background <ul><li>Over last couple of decades number of fund choices in a defined contribution plan has evolved from a fe...
Issues in Plan Design <ul><li>As a plan sponsor issues to consider when selecting the investment options available in a de...
Choice Overload <ul><li>Too many fund choices may lead to the following issues: </li></ul><ul><li>- Plan member may choose...
Choice Overload <ul><li>One may ask if there are an optimal number of funds to offer  </li></ul><ul><li>Though there is no...
Education <ul><li>Increased fund choice is coupled with the responsibility to provide increased education </li></ul><ul><l...
Fund Distinction <ul><li>A large number of funds can cause plan member confusion </li></ul><ul><li>Difficult for an employ...
Contact Us <ul><li>To learn more please contact us: </li></ul><ul><li>Proteus Performance Management Inc. </li></ul><ul><l...
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How Many Fund Choices In A Defined Contribution Pension Plan

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A presentation addressing the number of fund choices that should be made available to plan members in a defined contribution pension plan.

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How Many Fund Choices In A Defined Contribution Pension Plan

  1. 1. How Many Fund Choices in a Defined Contribution Pension Plan ? www.proteusperformance.com
  2. 2. Background <ul><li>Over last couple of decades number of fund choices in a defined contribution plan has evolved from a few options to a significant number of choices </li></ul><ul><li>Natural progression driven by both technological improvements and the desire of plan sponsors to offer their members new options </li></ul>www.proteusperformance.com
  3. 3. Issues in Plan Design <ul><li>As a plan sponsor issues to consider when selecting the investment options available in a defined contribution plan include: </li></ul><ul><li>Choice Overload </li></ul><ul><li>Education </li></ul><ul><li>Fund Distinction </li></ul>www.proteusperformance.com
  4. 4. Choice Overload <ul><li>Too many fund choices may lead to the following issues: </li></ul><ul><li>- Plan member may choose safest option, e.g. money market fund </li></ul><ul><li>- Plan member may make no choice and be placed in the default option </li></ul>www.proteusperformance.com
  5. 5. Choice Overload <ul><li>One may ask if there are an optimal number of funds to offer </li></ul><ul><li>Though there is no one single magic number, the table below provides some guidance: </li></ul>www.proteusperformance.com Source: Wells Fargo, 2006 Best Practices in Retirement Plans Survey.
  6. 6. Education <ul><li>Increased fund choice is coupled with the responsibility to provide increased education </li></ul><ul><li>Graph below indicates that financial education efforts can often result in good intentions but very little action </li></ul>www.proteusperformance.com Source: CAP Trends & Thoughts, Shaping Retirement Savings Programs and Their Use, June 2007.
  7. 7. Fund Distinction <ul><li>A large number of funds can cause plan member confusion </li></ul><ul><li>Difficult for an employee to differentiate between funds with potentially similar names that are managed differently </li></ul><ul><li>If there are multiple funds in a given asset class the member needs to be educated on their differences </li></ul>www.proteusperformance.com
  8. 8. Contact Us <ul><li>To learn more please contact us: </li></ul><ul><li>Proteus Performance Management Inc. </li></ul><ul><li>Toronto, Ontario Canada </li></ul><ul><li>Phone: 416-421-3557 </li></ul><ul><li>Fax: 416-421-1348 </li></ul><ul><li>Email: pension@proteusperformance.com </li></ul>www.proteusperformance.com www.proteusperformance.com

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