The survey found plan investments are more frequently monitored, with 64.4% of plan sponsors reviewing investments quarterly. The majority of plans have an investment policy statement (85.8% up from 54.3% ten years ago). Twenty percent of plans made changes to their investment lineup in 2009.
In addition, according to a press release, plan sponsors are working to help participants make good investment choices. Nearly a third (31.4%) of plans currently offer a professionally managed alternative – up from 26.2% in 2008. Advice is offered in 60.1% of plans, up from 51.8% in 2008. Just over a fifth (21.6%) of participants used advice when it was offered. The survey found participant usage tends to be greatest in small plans.
The availability and use of target-date funds continues to grow, with 62.3% of plans now offering them. The average allocation of plan assets to target-date funds has more than doubled since 2007 to 10.3%.
The survey also found:
- Two-thirds (66.7%) of companies retain an independent investment adviser to assist with fiduciary responsibility. For 54.2% of those companies, the fee is a fixed amount and for 36.1% the fee is percentage of plan assets.
- The number of funds offered to plan participants appears to be leveling out after many years of steady increase. Plans offer an average of 18 funds for both participant and company contributions. The funds most commonly offered are actively managed domestic equity funds (87.3% of plans), actively managed international equity funds (86% of plans), and indexed domestic equity funds (82.4% of plans).
- The average plan has approximately 60% of assets invested in equities. Assets are most frequently invested in actively managed domestic equity funds (28.9% of assets), target retirement date funds (10.3%), and stable value funds (9.7%).
Auto Enrollment and Roth Use Continues Increase
PSCA’s 53rd Annual Survey of Profit Sharing and 401(k) Plans finds the use of automatic enrollment and Roth 401(k) accounts continues to increase. Nearly four in ten plans (38.4%) have an automatic enrollment feature. Among plans that permit participant contributions, 41.3% allow participants to make Roth after-tax contributions (up from 36.7% in 2008).
The survey found automatic enrollment is most common in large plans – 53.7% of plans with 5,000 or more participants report having automatic enrollment. The most common default deferral is 3% of pay, present in 58% of plans, and 53.1% of plans automatically increase the default deferral percentage over time. The most common default investment option is a target retirement date fund (57%).
In plans that offered a Roth account, 13% percent of participants made Roth contributions.
Eighty-nine percent of U.S. employees at respondent companies are eligible to participate in an employer-sponsored defined contribution plan. On average, 87.3% of eligible employees have a balance in the plan. Twenty-two percent of plan participants are no longer actively employed by the plan-sponsoring company.
Participants who retired in 2009 participated in the plan for an average of 15.3 years.
Other survey findings included:
- Profit sharing plans tend to offer the most generous contributions, averaging 8.1% of pay. The average company contribution in 401(k) plans is 2.1% of pay and in combination plans it is 4.7% of pay.
- Hardship withdrawals are permitted in 85.6% of plans. The most common reasons for permitting hardship withdrawals include purchase of a primary residence or to prevent eviction or foreclosure (97.9%), medical expenses (97.2%), and post-secondary education expenses (93.5%). Just under 2% of participants took a hardship withdrawal in 2009, when permitted.
- Loans are permitted in 90.2% of 401(k), 86.6% of combination, and 35.5% of profit sharing plans. Half (51.9%) of plans with loans permit only one loan at a time. In plans with a loan feature, an average of 23.1% of participants have loans outstanding, with an average loan amount of $8,760. Loans account for 2.5% of total plan assets among plans with loans.
- 34.2% of plans have a Safe Harbor plan design; 23.4% of plans use a safe harbor match and 10.7% use a Safe Harbor non-elective contribution.
- 39.5% of plans provide immediate vesting for matching contributions, while 23% provide immediate vesting for profit sharing contributions. Among plans that do not have immediate vesting, graduated vesting is the most common arrangement for all plan types.
PSCA's Annual Survey reports on the 2009 plan-year experience of 931 plans with 8.6 million participants and more than $628 billion in plan assets. It is available for purchase for $375 for non-PSCA members and $145 for members here, or by calling (312) 419-1863.