Latest EBRI/ICI Database Study Shows Consistent Industry Trends

August 24, 2006 ( - The latest industrywide portrait of the 401(k) space for 2005 paints a picture that is remarkably consistent with current trends.

A news release from the Investment Company Institute (ICI) said an analysis of the 401(k) database it maintains in conjunction with the Employee Benefit Research Institute (EBRI) showed that:

  • The bulk of 401(k) plan assets remains invested in equity securities.At year-end 2005, equity securities – equity funds, the equity portion of balanced funds and companystock – represented about two-thirds (68%) of plan participants’ assets. The largest portion (48%) of participants’ account balances were invested in equity funds, on average. Altogether, average asset allocations of plan participants are little changed in 2005 from 2004.
  • Lifecycle and lifestyle funds continued to grow in popularity, especially among new hires.Recently hired plan participants in their twenties held a higher percentage of their accounts in lifestyle, lifecycle, and other balanced funds than did their peers in 1998. Plans including the lifecycle or lifestyle funds in their lineups went from 27.6% in 2000 to 48.5% in 2005.
  • Company stock as a percentage of plan assets continued to fall in 2005.Recently hired participants were less likely to hold company stock and tended to hold lower concentrations of their accounts in company securities.
  • The analysis also found that participants who held accounts over the long term ended up with significantly higher balances. The average account balance increased 50% among 401(k) participants who held accounts from 1999 to 2005. The average account rose among the long-time participants from $67,785 at year-end 1999 to $102,014 by year-end 2005.
  • Finally, as has been the case for the 10 years that the EBRI/ICI database has tracked 401(k) plan participants’ loan activity, relatively few participants make use of borrowing privileges. At year-end 2005, only 19% of those eligible for loans had loans outstanding. As in previous years, loan activity varies with age, tenure, salary, account balance, and plan size.Among participants nearing retirement age, only 10% had a loan outstanding at year-end 2005. Among participants with outstanding loans at the end of 2005, the average unpaid balance was $6,821.

The EBRI-ICI database covers 17.6 million 401(k) participants, in 47,256 plans, holding $1 trillion in assets at year-end 2005.