Morningstar - Q2 2021 - 44

Strategies

More Women, Higher-Quality Plans
Defined-contribution plans run
by women are better for participants.

DC PLANS

David Blanchett, Julie Varga, and Chris Weirath

Diversity is a topic of growing importance
and interest in the business world. Research
suggests that companies that are diverse-
with employees and leaders who represent
diversity across genders, races, ethnicities,
religions, ages, sexual orientations, and physical
abilities-are more successful than those
that are not. This effect is often referred to as
the " diversity dividend. "
While there have been gains in many industries
when it comes to gender diversity, there are
still improvements to be made in financial services.
For example, a recent Morningstar report found
that the percentage of mutual fund managers
who are women remains unchanged from 2000 to
2019, holding steady at 14%.1 This imbalance
was perhaps best captured in a report published
by Morningstar U.K. titled " More Funds Run
by Daves Than Women, " which noted that funds
in the United Kingdom run by managers
named David or Dave outnumbered funds run
by women of any name.2
But the diversity dividend is paying off in one
significant area of finance: defined-contribution
plans. These plans (such as 401(k)s and
403(b)s) make up an important segment of the
$33.1 trillion U.S. retirement market. According to
the Investment Company Institute, assets
in defined-contribution plans were $9.3 trillion

as of Sept. 30. In a new study, we find that
not only has there been a large increase in gender
diversity among the people who administer
defined-contribution plans but also that women
do a better job than men at running them.
We find that in 2000, approximately 30% of plans
were run by women; in 2017, that percentage
increased to just under 50% of plans. In addition,
according to our analysis, women-run plans were
more likely to exhibit better governance attributes,
to automatically enroll participants, and to
offer target-date funds than plans run by men.
Overall, this research suggests that gender
diversity is growing among defined-contribution
plan administrators and that this increase has
benefited retirement plan participants.
Our Study
Data for this analysis comes from Form 5500
filings that are available for free on the Employee
Benefits Security Administration website.
Employers maintaining a 401(k) plan, or a 403(b)
plan covered by Erisa, file a Form 5500 with
the U.S. Department of Labor. This file provides
information about the plan, its financial condition,
investments, and operations. Our analysis
uses plan filings from the 2000 to 2017 plan years.
The number of plans included in the analysis
increases considerably over the test period, from
9,300 in 2000 to 45,681 in 2017.

While many defined-contribution plans
are operated by a committee, the annual Form

1 Lallos, L. 2020. " Women in Investing: Morningstar's View. " Morningstar.com. March 2.
2 Esposito, A. 2019. " More Funds Run by Daves Than Women. " Morningstar.co.uk. Nov. 19.
3 https://www.ssa.gov/oact/babynames/limits.html

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Morningstar Q2 2021

5500 must be signed by an individual. This
person is the plan administrator. Plan
administrators are generally responsible for
operating the defined-contribution plan
and, by signing the Form 5500, are attesting under
the penalty of perjury that all information
is complete and accurate.

For each defined-contribution plan in our study,
we first take the first name of the person who
signed the Form 5500 as the plan administrator.
We then determine the person's gender by
matching the name to a data set that includes
information about baby names from Social Security
card applications.3 The gender-matching data
set includes first names, gender, and frequency.
We use this data to estimate the probability
of a given first name being male.
A few names are ambiguous (Terry and Lee, for
example). However, if we define male as
someone with a name that has a probability over
95% of being male and female as someone
with a male-name probability of less than 5%,
only 5.66% of plan administrator names would be
undefined. Note, though, we use the actual
gender probability for most of the analysis, unless
otherwise noted.
Gender Diversity Among Plan Administrators
EXHIB IT 1 shows the probability of the plan
administrator being male for the eight different
plan sizes. To be included in the analysis, a plan
must have had a minimum of 100 participants.

The trend is clear: From 2000 to 2017, the
probability of the plan administrator being a man
has declined considerably, from approximately
70% in 2000 to just above 50% in 2017.
In other words, about 70% of plan administrators
were men in 2000, and only about 50% were
men by 2017.
It is unclear whether the trend will continue,
but if it does, most plan administrators are likely to
be women in the future.
http://www.Morningstar.com http://Morningstar.co.uk https://www.ssa.gov/oact/babynames/limits.html
Morningstar - Q2 2021

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