DC Participants Stay the Course in Q1

July 30, 2012 (PLANSPONSOR.com) - Only 1% of defined contribution (DC) plan participants stopped contributing to their plans in the first quarter, an Investment Company Institute (ICI) report found.

In addition, only 1.2% took withdrawals. These figures exactly matched data for the first quarter of 2011. In the first quarter of 2010, slightly more people (1.1%) stopped contributing to their DC plan. “It is possible that some of these participants stopped contributing because they reached the annual contribution limit,” the ICI said.  

As far as hardship withdrawals were concerned, the number also held steady, with 0.4% of plan participants taking out hardship withdrawals in the first quarter, on par with the first quarter of 2011. “The withdrawal and contribution data indicate that essentially all DC plan participants continued to save in their retirement plans at work,” the ICI said.   

Nonetheless, the Institute added, “loan activity continues to remain elevated compared with four years ago. At the end of March 2012, 17.9% of DC plan participants had loans outstanding, compared with 15.3% at year-end 2008. This pattern of activity was also observed in the wake of the bear market and recession earlier in the decade.”  

The report also noted that few investors changed their portfolios in the first quarter, as the S&P 500 Index rose 12.6%; only 4% changed the asset allocation of their balances, and 4.2% changed the asset allocation of their contributions. “These levels of reallocation activity were similar to the reallocation activity observed in the same time frame a year earlier,” the ICI said.  

The ICI data was based on recordkeeping data from 24 million participant accounts in a variety of DC plans. 


Lee Barney