DC Assets Fastest Growing Among Employer-Sponsored Plans

July 2, 2012 (PLANSPONSOR.com) - Assets in employer-sponsored retirement plans, IRAs, and annuities totaled $17.9 trillion at year-end 2011, up slightly from year-end 2010, according to data from the Investment Company Institute (ICI).

The largest components of retirement assets were IRAs and employer-sponsored defined contribution (DC) plans, holding $4.9 trillion and $4.5 trillion, respectively, at year-end 2011. Other employer-sponsored pensions include private-sector defined benefit (DB) pension funds ($2.4 trillion), state and local government employee retirement plans ($3.0 trillion), and federal government plans—which include both federal employees’ DB plans and the Thrift Savings Plan ($1.5 trillion). In addition, there were $1.6 trillion in annuity reserves outside of retirement plans at year-end 2011.   

The 2012 edition of ICI’s Fact Book says 69% of U.S. households (or 82 million households) reported that they had employer-sponsored retirement plans, IRAs, or both in May 2011. Sixty-one percent of U.S. households reported that they had employer-sponsored retirement plans—that is, they had assets in DC plan accounts, were receiving or expecting to receive benefits from DB plans, or both. Thirty-nine percent of households reported having assets in IRAs. Thirty-one percent of households had both IRAs and employer-sponsored retirement plans.   

Ownership of IRA and DC plan assets has become more common with each successive generation of workers. This can be seen by comparing the ownership rates of households grouped by the decade in which the household heads were born. At any given age, younger households have had higher IRA and DC plan ownership rates over time. For example, in 2011, when they were 51 to 61 years of age, 71% of households born in the 1950s owned IRAs or DC plan accounts. By comparison, households born a decade earlier had a 66% ownership rate when they were ages 51 to 61 in 2001.   

At younger ages, the differences between birth cohorts are even greater; 71% of households with heads born in the 1970s held assets in IRAs or DC plan accounts in 2011 when they were ages 31 to 41, while 54% of households born in the 1950s owned IRAs or DC plan accounts in 1991, when they were ages 31 to 41.  

Assets in employer-sponsored DC plans have grown more rapidly than assets in other types of employer-sponsored retirement plans over the past quarter century, increasing from 27% of employer plan assets in 1985 to 40% at year-end 2011. With $3.1 trillion in assets at year-end 2011, 401(k) plans held the largest share of employer-sponsored DC plan assets. 403(b) plans and 457 plans held another $941 billion in assets. The remaining $520 billion in DC plan assets was held by other DC plans without a deferral feature.  

The 2012 Investment Company Institute Fact Book is at http://www.icifactbook.org/.