DC Investors Stayed the Course in Q1 2017

Amid strong market returns in Q1 2017, most participants left asset allocations in DC plans unchanged, according to a new report by the ICI.

Nearly all active defined contribution (DC) plan participants continued investing in their accounts during the first quarter of 2017, according to recordkeeping data gathered by the Investment Company Institute (ICI).

The ICI analysis finds only 1.1% of DC plan participants stopped contributing during this period.

Moreover, asset-allocation shifts and withdrawal activity remained low during this time frame. According to the ICI, 4.6% of DC plan participants changed the asset allocation of their account balances, and 3.8% changed the asset allocation of their contributions.

The ICI points out that during the first quarter of the year, stock prices generally rose. On net, the S&P 500 total return index was up 6.1%.

In the first quarter of 2017, 1.3% of DC plan participants took withdrawals. The rate was about the same as it was during the first quarter of 2016. Levels of hardship withdrawals were also low, with only 0.4% of DC plan participants making them during this time period. The same share made hardship withdrawals in the first quarter of 2016.

Loan activity also slightly ticked down. At the end of March 2017, 16.6% of DC plan participants had loans outstanding, compared with 17.0% at the end of 2016. The ICI notes the trend follows a seasonal pattern observed during the last several years.

The ICI notes, “Two factors appear to influence DC plan participants’ loan activity: reaction to financial stresses and a seasonal pattern. Likely responding to financial stresses, the percentage of DC plan participants with loans outstanding rose from the end of 2008 (15.3%) through 2011 (18.5%). This pattern of activity is similar to that observed in the wake of the bear market and recession earlier in the decade … Loan activity appears to have a quarterly seasonal pattern: the first quarter of the year tends to have lower percentages of DC plan participants with loans outstanding compared with later quarters.”

Overall, the study finds that 28% of U.S. retirement assets were DC plan assets.

This data comes from the ICI’s “Defined Contribution Plan Participants’ Activities, First Quarter 2017,” report. The study tracks contributions, withdrawals, and other activity based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans. The full report can be accessed at ici.org.