Spectrem Group research shows small plan sponsors, defined as those with less than $10 million in assets lack the tools and information necessary to protect themselves from potential liabilities.

Small Plan Sponsors with Written Investment Policies (Plans with Less Than $10MM in Assets)

Despite the lessons learned from recent scandals in the financial industry, 34% of small plan sponsors have no written policy governing the investment options available to plan participants. Research also shows that the smaller the plan, the less likely it is to have a formal investment policy. Some 39% of plans with less than $1 million in assets lack an investment policy, compared with 34% of plans with $1 million to $5 million in assets and 30% of plans with $5 million to $10 million in assets.

Although plan sponsors should be more aware than ever of the need for an appropriate investment lineup and effective monitoring, the number of organizations that have taken steps to do so is surprisingly small.

This loss of foresight presents an opportunity for plan providers to take a more consultative approach with the plans they service, especially those with less than $1 million in assets.

Small plan sponsors also have another potentially risky gap in their oversight systems. Some 20% don’t know their plan’s cost to participants, and 17% aren’t aware of their plan’s cost to the firm.

These numbers are striking at a time when plan fees have come under close scrutiny and fee transparency and disclosure are attracting increased attention.