New BrightScope Initiatives and Analytics Improvements

BrightScope has been working diligently on three major initiatives:

1.  Proactively Contacting Plan Sponsors. Starting next month BrightScope will be contacting all plan sponsors with rated plans on the BrightScope website. We consider plan sponsors to be our partners and hope to demonstrate our commitment to working with them by actively engaging them in the BrightScope Rating process.  Many of the plan sponsors that we have been working with have mentioned that they would like to have the opportunity to review new data on their plan before it is used to calculate a rating.  We are working hard to make that a reality.

2. Rating More Plans.  We get numerous requests to rate plans every single day and many in the industry have said that the more plans that we rate the more valuable the benchmarking will be.  In the last few weeks we have dramatically increased the number of plans that we have rated. We are now rapidly approaching 4,000 rated plans:

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We have also set a very ambitious goal of rating 30,000 plans before the end of the year:

brightscope-current-and-projected-plan-ratings

3. Rating Smaller Plans.  When we launched we aimed for maximum impact by rating the largest and most complex plans in the defined contribution marketplace. This meant that the plans we rated were primarily large plans ($100mm +). However many advisors and plan sponsors that we speak with have plans as small as $100,000. While these plans weren’t an initial priority we recognize that ALL plans, small and large, have the same ERISA fiduciary requirements and need to be able to properly benchmark their plans against a reasonable peer group. With this in mind we have changed our plan rating priorities to insure that every plan, of every size and in every industry would have at least 15 rated peer group companies. As such our mix of rated plans has changed dramatically over the past 5 months:

brightscope-rated-plans2Starting in the last few weeks we have focused on rating more small and micro-sized plans. Now we have over 1,000 plans rated between $1 million and $10 million in assets as well as nearly 200 plans rated with less than $1 million.  If you are looking to benchmark your 401k plans we now have robust peer groups for plans of all sizes.

We have made several major improvements to our analytics over the last few weeks that we are releasing this week:

1. Plan Eligibility is now fully supported and included in analytics. A plan’s eligibility period now impacts the BrightScope rating. Longer eligibility periods have a negative impact on the BrightScope rating. BrightScope is also working on including match eligibility in the rating, which should be supported soon.

2. Fees on Participant Loans.  Pending the receipt of more detailed participant loan fee data from providers, participant loan fees have been removed from total plan cost calculations in the short term.  Once the new data has been gathered and better estimates can be built, BrightScope will build a newer participant loan calculation that should build better estimates based on better comparison data.

3. Insurance Fees.  While group variable annuity charges are generally not included in the fee disclosures on the Form 5500, BrightScope has been able to obtain fee information on GVA charges from several major providers to build in estimates of what these fees should be based upon the size of the plan. We felt that failing to include these fees in our total cost calculations was unreasonable.  If you are a plan sponsor or adviser we encourage you to send us updated GVA fee information to ensure your plan’s total plan cost calculations are accurate.

4. Index Fund Fee changes.  After receiving updated data from numerous plan sponsors and fund companies, BrightScope has been able to update its index fund fee estimates for explicit costs and transaction costs.  In most cases this change has resulted in lower fee estimates for plans with index funds than existed previously in the database.

If you have any questions about how these changes may have affected your plan please do not hesitate to contact us so that we can review the changes with you in person.

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