Insights from Callan on 2025 Defined Contribution Trends
Understanding Callan's Latest Survey Insights
Callan, an esteemed institutional investment consulting firm, recently revealed findings from its 2025 Defined Contribution (DC) Trends Survey. This comprehensive report, now in its 18th year, sheds light on the significant aspects of DC plan management, including governance, investment options, cost considerations, and plan structures.
Patrick Wisdom, a vice president and DC consultant at Callan, stressed the importance of the survey. He stated, "Not only does the survey provide a benchmark for sponsors to evaluate their plans compared to peers, but it also gives them the information they need to improve their plans and outcomes for participants." It showcases ongoing trends, highlighting the continuous focus of sponsors on effective governance practices and cost management strategies.
Key Trends from the Survey
The survey emphasizes several key areas of focus that DC plan sponsors consider crucial in 2024:
Investment Management Fees
A critical area for DC plan sponsors is investment management fees, which have become a focal point in ensuring that plans provide maximum value to participants. The ongoing examination of fund and manager due diligence is underscored as an essential practice moving forward.
Investment Structure Evaluation
Another vital finding is the significance of investment structure evaluation. Many sponsors are now opting for investment policies that reflect a balanced approach between active and passive investment strategies. Notably, half of the respondents reported offering a mirrored lineup, signifying a trend towards providing participants with both active and passive options.
New Developments in Fiduciary Actions
Fiduciary actions relating to investment policies have become increasingly prevalent among DC plan sponsors. A staggering 86% of sponsors reported reviewing their investment policy statements, maintaining consistency with previous year trends. Interestingly, formal fiduciary training has seen a notable increase, rising to 73% from 53% in the previous year.
Adoption of Retirement Income Solutions
The adoption of retirement income solutions is growing. As the survey indicates, most plans in 2024 provided some form of retirement income options to employees. Partial distributions and installment payments emerged as the most common solutions, although there is still a moderate level of adoption for guaranteed income components.
Support for Managed Account Services
Furthermore, the survey indicates robust engagement with managed account services, with over half of the participants (57%) incorporating such services into their plans. Ensuring quality and performance, 74% of respondents noted that they monitor or benchmark these services regularly to ensure alignment with participant needs.
Retention of Participant Assets
Retaining participant assets has become a prominent goal, with 84% of sponsors seeking to retain retirees' assets, and 54% aiming to keep the assets of terminated participants. This focus reflects the evolving landscape of DC plan management where participant retention is viewed as essential for plan viability.
Implementation of New Regulations
The survey also addressed the implementation of provisions from the SECURE 2.0 Act. Out of nearly 100 provisions from this act, the most commonly adopted was the increase in catch-up contributions for participants aged 60 to 63, signaling a shift toward enhancing retirement flexibility.
The survey gathered responses from 89 DC plan sponsors, reflecting a diverse mix of industries with strong representation from financial services and governmental entities. This wide participation highlights the collective effort and commitment to advancing defined contribution plan management practices.
About Callan
Callan, established in 1973, operates as an employee-owned investment consulting firm. Its mission has always been to empower institutional clients with tailored investment strategies grounded in proprietary research and continuous education. With a portfolio exceeding $3 trillion in total assets under advisement, Callan stands as one of the largest independently owned investment consulting entities in the United States. It caters to a diverse clientele, including pension plans, defined contribution sponsors, endowments, foundations, and independent investment advisors.
Frequently Asked Questions
What is the main focus of Callan's 2025 DC Trends Survey?
The survey focuses on governance, investments, fees, and plan design in DC plan management.
How many years has Callan conducted the DC Trends Survey?
The survey has been conducted for 18 years, providing valuable insights each year.
What percentage of respondents reviewed their investment policy statements?
86% of survey respondents reported reviewing their investment policy statements.
What trends are emerging in retirement income solutions?
In 2024, most plans offered retirement income solutions like partial distributions and installment payments.
How does Callan serve its clients?
Callan provides customized investment solutions backed by research for various institutional clients.
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