DC Plan Assets Continue to Grow

April 21, 2008 (PLANSPONSOR.com) - A new study by Greenwich Associates shows that defined contribution plans have grown to account for 46% of assets among U.S companies with more than $250 million in retirement plan assets.

According to a Greenwich Associates news release, DC plans will continue to attract assets as companies continue to close their defined benefit pension plans to new employees.

Also affecting the picture is the fact that DC sponsors are putting in place effective practices, the announcement said:

  • More than a third of U.S. DC plan sponsors are using automatic enrollment in their 401(k) plans, up from about a quarter of plans in 2006. Among plans with less than $250 million in assets, 36% have taken this step.
  • The percentage of large U.S. plan sponsors saying they offer target retirement funds as an investment option in their 401(k) plans increased to almost 80% in 2007 from 60% last year. At the same time, the share of non-users saying they are seriously considering offering target retirement date funds in the next two years increased to 48% in 2007 from 36% in 2006.
  • Among companies with more than $250 million in DC plan assets, more than 30% now say they contribute to employees’ 401(k) plans even if participants do not make any contributions of their own.
  • The average allocation to international equities increased to 8.4% of DC plan assets in 2007 from 6% in 2006 among funds with more than $250 million in plan assets. Allocations among smaller funds increased to 9% of total assets from 8%.

“The changes being enacted by corporate plan sponsors will have a positive effect on DC plan participation rates, investment returns and, ultimately, outcomes for both participants and plan sponsors,” said Greenwich Associates consultant Chris McNickle, in the announcement.