Employees today are getting fewer investment options and more advice in their defined-contribution plans, according to a recent survey of plan sponsors.

The number of investment choices in defined-contribution plans now averages 16, down from 20 in 2001. That compares with an average of 11 investment choices in 1998, according to a tri-annual survey of plan sponsors by institutional investment consulting firm Callan Associates. The survey polled 95 plan sponsors with more than $100 billion in total assets and 1.1million participants.

"In the bull market, a philosophy of 'more is better' prevailed," said Anna Oakley, vice president and DC practice leader. "As the market moderated, plans found that too many choices could overwhelm participants and lead to bad investment decisions."

Asset allocation or lifecycle funds remain an important plan offering, with 74 percent of respondents including them in their menu of choices. Risk-based lifecycle funds still represent the majority, but time-based funds have risen to 42 percent of the mix this year, versus 22 percent in 2001. According to Callan, plan sponsors noted that time-based products are easier to explain and easier for participants to understand.

One-third of respondents are currently offering advisory services to participants, with another third indicating that adding an advice component is a priority for 2005. Of the respondents currently providing advice, about 60 percent rely on an independent Web-based provider, while only 21 percent use their record-keeper's proprietary model for these services. In 2001, of the defined-contribution plan providers then offering advice, 43 percent used their record-keeper. However, Callan noted that only 36 percent of plan sponsors have procedures in place to monitor outside, third-party advice providers on an ongoing basis.

Virtually every DC plan sponsor surveyed has had a fee discussion or reduction with their current provider within the past three years, with more than half conducting that review within the past year, Callan said.

One third of survey respondents indicated that they would be willing to incur an annual per-participant record-keeping fee to minimize the impact of investment management fees on plan assets.

Survey results show that the number of plans maintaining a documented investment policy statement increased to 86 percent, from 78 percent in 2001. Three-quarters of respondents conduct quarterly meetings to address oversight responsibilities, including investment policy and 404(c) compliance.

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