Sign of DB Life in 5500 Data

For the first time in thirteen years, the number of active participants in defined benefit plans actually increased – growing 1% to 23.0 million, according to 1998 5500 data just released by the Pension and Welfare Benefits Administration (PWBA). Additionally, while the number of DB plans continued to slip, the 5% decrease was the smallest percentage drop on a dozen years, according to the report.

Living Large

Not surprisingly, 401(k) programs continued to thrive.  The number of active participants in 401(k) programs continued to climb – growing another 10% to 37.1 million in 1998, while the number of plans rose by 13%, topping the 300,000 mark for the first time.  The PWBA notes that, at that point, 401(k)s accounted for:

• 41% of the total number of retirement plans
• 51% of all active participants
• 38% of all retirement plan assets

As a consequence, in 1998 47% of all contributions to retirement programs were made by employees, compared to just 11% ten years previously. In real dollars, employer contributions to all types of plans were 18% lower in 1998 than in 1978 – while employee contributions were 480% higher, according to the report.

Employees were responsible for two-thirds of the contributions made to 401(k) plans in 1998.  Contributions to 401(k) type plans increased by 16% in 1998, while benefit payments rose 30%.  The report notes that part of the increase is due to rollovers of benefits by employees from one employer to another – some 7%, or $8.9 billion, of contributions to 401(k)s were reported as “contributions by others”, a category generally used in classifying rollover monies.

Cashing Out?
 
Overall benefit payments increased by 17% in 1998. Benefits paid from defined contribution plans generally increased by 20%, while benefits paid from DB plans were 14% higher than the year before.

The Private Pension Plan Bulletin Abstract of 1998 Form 5500 Annual Reports also noted that the rate of return for 401(k) plans in 1998 was 12%, compared with an average of 15.8% for all defined contribution plans, and 14.2% for defined benefit plans.  The rate of return for single employer plans was 15.3% versus 11.9% for multiemployer offerings, which tend to invest a lower percentage of plan assets in stocks.

Assets held in private pension plans rose 13%, topping the $4 trillion mark in 1998.  Assets in 401(k) type programs increased by 22% to $1.5 trillion, while DB assets rose 12% to $1.9 trillion.  Non-401(k) DC assets slipped by 2%.

Read the full report .