Morningstar - Q2 2021 - 46

Strategies

EXHIBIT 3

Better Plans By far, a higher percentage
of plans run by women offered
a high-quality service in 2009 and 2017
than plans administered by men.
Service Availability by Plan Size:
Percentage Male Plan Administrator Minus
Percentage Female Plan Administrator
A negative number, shaded in blue, indicates that
more women-run plans offered this service than did
men-run plans.

2009 Differences
Plan Ppts

404 (c) AutoEnroll

TDF

Avg

100-249

-3.64

-0.86

-6.02

-3.51

250-499

-2.86

-1.07

-6.17

-3.36

500-999

-2.17

-2.71

-5.36

-3.41

1,000-2,499

-4.66

1.43

-6.43

-3.22

2,500-4,999

-9.50

-3.48

-9.17

-7.38

5,000-9,999

-8.30

-4.16 -13.34

-8.60

>10,000

-4.22

2.45

-1.63

-1.13

Average

-5.05

-1.20

-6.87

-4.37

2017 Differences
Plan Ppts

404 (c) AutoEnroll

TDF

Avg

100-249

-6.49

-2.31

-7.59

-5.46

250-499

-10.50

-4.83

-8.77

-8.03

500-999

-11.19

-3.89

-4.84

-6.64

1,000-2,499

-2.62

-8.55

-5.82

-5.66

2,500-4,999

-

-0.75

-6.55

-3.65

5,000-9,999

-

1.75

-8.08

-3.17

>10,000

-

-0.76

-6.05

-3.41

Average

-7.70

-2.76

-6.81

-5.15

The year-to-year changes of the number of plans
that offer each service are relatively small
and not necessarily useful to our analysis. Instead,
we focus on two years: 2009 and 2017.
Changing a defined-contribution plan to offer
a new service can take years. Attributing
changes to a plan based only on who the plan
administrator is during the respective
test year would not capture the contributions
of the plan's previous administrators.
Therefore, we average the probabilities that
a plan administrator was a woman or a
man for several years leading up to 2009 and
to 2017. The gender probability for the
2009 analysis is the average of the 2000-09
plan years; the gender probability for the 2017
analysis is the average of the 2010-17 plan
years. The 2017 test analysis only includes
plans that did not offer the respective solution
as of 2009. This means the number of plans
considered in the 2009 analysis is the same
across all three services, but the plans in
the 2017 analysis differ by the respective test.
For each plan, we categorize the administrator
as male if the respective average gender
probability for the test period is 95% or greater or
as female if the probability is less than 5%.
In other words, these are plans that consistently
were administered by a man or woman during
the years before the test period.

Source: Morningstar.

For each service, we then subtract the
percentage of women who run a plan with that
service from the percentage of those plans
run by men. A negative number means
that a higher percentage of plans run by women
offer that service than do men-run plans.
The gender differences for the respective service
and plan size are listed in EXHIB IT 3 .

increase of 173%). Default investment
has experienced the largest absolute growth,
increasing from 58.1% of plans in 2009
to 89.2% in 2017 (for a 54% increase). The
percentage of plans noting 404(c) compliance
increased from 87.3% in 2009 to 95.3% in
2017 (a 9% increase).

Whether it was in 2009 or 2017, there is clear
evidence that the probability of offering
the respective defined-contribution service is
lower if the plan administrator is a man.
In other words, there is compelling evidence
that defined-contribution plans administered
by women have more of the attributes
that make a high-quality plan than those plans
run by men.

46

Morningstar Q2 2021

Lasting Impact
This article explored gender diversity among
defined-contribution plan administrators
since 2000 and notes a significant improvement
over the period, where women represented
approximately 50% of plan administrators in 2017,
a gain from 30% in 2000. Additionally, plans
in which the administrator is a woman appear
to be better because they were more likely
to exhibit good governance attributes, more likely
to automatically enroll participants, and more
likely to offer target-date funds.

This research has important implications,
especially for those who work in the definedcontribution space. Although companies
have made strides to diversify their management
ranks (though arguably not enough), there is
still a lot of work that needs to be done
within the retirement benefits area beyond just
gender diversity. As this article shows, the
makeup of plan administrators can have
a meaningful and lasting impact on the lives of
plan participants-not only while administrators
are working for the employer but for many
years after they leave the company.
To drive success and innovation, companies
have learned that the diversity of their
salespeople, marketing professionals, executives,
and other employees should reflect the
diversity of their clients and society in general.
Similarly, benefits professionals should
better reflect the diverse gender, racial, sexual,
and religious makeup of the employees
they serve to help ensure that their
offerings result in productive, healthy, and
competitive workforces. K
David Blanchett, Ph.D., CFA, CFP, is head of retirement
research with Morningstar Investment Management. He is
a member of the editorial board of Morningstar magazine.
Julie Varga is vice president, investment and product
research, with Morningstar.
Chris Weirath is senior vice president, global account
management, with Morningstar.
Morningstar - Q2 2021

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