Participation Rate Dips in 2003

October 4, 2004 ( - Plan sponsors may have dedicated themselves in recent years to lure more employees into workplace retirement plans and to save enough to live comfortably when they stop work, but the effort doesn't appear to be paying off.

The 47th Annual Survey of Profit Sharing and 401(k) Plans from the Profit Sharing/401(k) Council of America (PSCA), which studied the 2003 plan year of 1,161 plans with over 3.4 million participants and more than $412 billion in plan assets, found that 76.4% of eligible employees have K plan balances. That was actually down from the 80.3% who participated in a K plan the year before (See Employee DC Deferral Rates Are Down, Company Contributions Up ).

Even for those who got into their employer’s plan, there’s still some question about whether they are setting aside enough for their post-retirement needs. Average deferral rates in 2003 were 5.2% of pay for non-highly compensated workers – flat compared to 2002’s 5.2% – and 6.4% of pay for highly compensated workers – up a tick from the 6.3% in 2002.

One thing that did advance during 2003 was company contributions, according to the PSCA. According to the survey, average company contributions were 4.4% of payroll – up from 4.1% the year before. The figure ranged from a 2003 high for profit sharing plans (9.3% of pay) and low in 401(k) plans (3% of pay). That compares with 8.8% and 2.8% respectively in 2002.

Different employers figured their contributions differently. In plans permitting participant contributions, the most common formula is a fixed match only, in 33.7% of plans. The most common type of company contribution for profit sharing plans is a discretionary profit sharing contribution only, in 68.7% of plans. For plans with fixed matches, the most common matches are $.50 per $1.00 up to the first 6% of pay (28.2% of plans), $1.00 per $1.00 up to the first 3% of pay (7.1% of plans) and $.25 per $1.00 up to the first 6% of pay (7.1% of plans).

Fund Options

Participants continued to have more and more investment options from which to choose. Some 87.3% of plans offer 10 or more funds, up from 80.8% in 2002 and 69.8% in 2001. Plans offered an average of 17 funds for participant contributions in 2003, up from 15 the year before. The funds most commonly offered for participant contributions are actively managed domestic equity funds (73.7% of plans), actively managed international equity funds (69.3% of plans), balanced stock/bond funds (67.9% of plans), and indexed domestic equity funds (62.5% of plans).

During 2003, the typical plan had approximately 63% of assets invested in equities. Assets were most frequently invested in actively managed domestic equity funds (31.2% of assets), balanced stock/bond funds (11.3%), stable value funds (9.8%), indexed domestic equity funds (9.3%), and cash equivalents (6.8%).

The 2003 survey also found that:

  • Investment advice was offered in 54.1% of plans, up from 51.9% in 2002 and 41.4% in 2001. The most common methods of delivery were one-on-one counseling (56.2% of plans), internet providers (52.2%), and telephone hotlines (31.5%). Smaller companies generally use one-on-one counseling (70.1%), while larger companies tend to use internet providers (75.5%).
  • Some 30.6% of participants used advice when it was offered. This percentage has remained level for the past few years, with 31.1% using advice in 2002 and 2001, and 30.9% using advice in 2000. Participant usage tends to be greatest in the smaller plans.
  • Self directed brokerage windows were offered in 13% of plans, while open mutual fund windows are offered in 6.1% of plans. Some 0.7% of plan assets were invested through brokerage windows and 0.1% of plan assets were invested through mutual fund windows.
  • Some 8.4% of respondents have automatic enrollment. Automatic enrollment is most common in large plans – 24.2% of plans with 5,000 or more participants report having automatic enrollment, while only 1.1% of plans with fewer than 50 participants have it.
  • Immediate vesting is present in 39.4% of 401(k), 15.4% of profit sharing, and 23.8% of combination plans. Graduated vesting tends to be the most common arrangement for all plan types.

The survey is available for purchase for $295 for non-PSCA members and $95 for members. To order, go to or call (312) 419-1863.