SCOPE:
Plan A engaged EnnisKnupp to conduct a comprehensive review of its deferred compensation program. This review included:
- Examining the Plan’s Investment Policy Statement from a governance perspective
- Conducting a due diligence review of the service provider
- Analyzing the Plan’s fees, both those borne by the plan sponsor and by the participant
- Evaluating the investment structure for appropriate diversification and number and types of investment options offered
- Reviewing the 30 core investment options for organizational issues, performance, and governance practices
- Comparing our findings to a peer universe to ensure best practices were in place
APPROACH:
Our approach began with a detailed project plan to address all the items included in the scope of work. We identified the client’s unique circumstances, the project timeline, and deliverables. We reviewed EnnisKnupp’s internal databases for information that was relevant to this project. The databases we utilized included capital markets expectations; investment policy best practices; recordkeeper capabilities and fees; and our investment manager research database.
In addition, we conducted customized research. We reviewed the Plan’s investment policy statement in the context of their unique needs and circumstances. We conducted on-site due diligence with their recordkeeper to review the services provided and their corresponding fees. We gathered updates on the investment managers in the Plan and completed performance analyses. We reviewed the Plan’s overall cost and investment management fees.
RECOMMENDATIONS:
After thorough analysis and research, we made dozens of recommendations to Plan A. We confirmed our rationale and advice highlighting any compliance or variance from best practices. In many areas, we confirmed that the Plan was exercising sound governance procedures for their deferred compensation program. Some specific recommendations were:
Investment Policy Statement. We recommended policy additions to guide and disclose investment risk, monitor investment options and fees, and articulate fund mapping strategies (when they are needed).
Investment Structure and Core Investment Options. We made several recommendations to strengthen the Plan including the addition of investment strategies (passive equity options) and the replacement of a money market fund with a stable value fund for its slightly higher return potential and liquid and conservative position. We also recommended manager changes where we believed more compelling alternatives existed and sought lower-fee share classes for existing fund options, where appropriate.
OUTCOMES:
The client was pleased with our work, and believed the review confirmed many of the sound practices already in place and identified areas in which improvements could be made. As a result of our work, the Plan could confidently re-affirm their choice of recordkeeper and the general approach they had adopted to oversee and monitor the Plan.
We worked with staff to prioritize our recommendations and develop a work plan to address our recommendations. The ultimate outcomes included:
- Updated investment policy statement
- Adoption of additional policies to guide and disclose investment risk
- Lower fees for the plan sponsor and plan participants
- More compelling investment line-up