Survey Finds over Half of DC Plans Offer Investment Advice

According to data on the PSCA’s Web site, the survey, which used 2004 data, found the most common types of advice offered are one-on-one counseling (56.3%), Internet providers (53.5%) and telephone hotlines (34.3%).

Companies offered an average of 18 funds for participant contributions and 17 funds for company contributions in 2004, up from 17 and 16 funds in 2003, according to the data. The funds most commonly offered for participant contributions are actively managed domestic equity funds (77.8% of plans), actively managed international equity funds (71.2% of plans), balanced stock/bond funds (69.3% of plans) and indexed domestic equity funds (67.9% of plans).

The average plan in the study has about 65% of assets invested in equities. Assets are most commonly invested in actively managed domestic equity funds (31.7% of assets), indexed domestic equity funds (10.3%), stable value funds (9.7%) and balanced stock/bond funds (9.6%).

Seventy-seven percent of eligible employees participated in their 401(k) plans in 2004, with the average deferral percent for non-highly compensated participants averaging 5.4% – little changed from past years.

The average company contribution for plans in the survey was 4.5% of payroll. Company contributions were highest in profit sharing plans (8.2% of payroll) and lowest in 401(k) plans (2.9% of payroll).

In plans permitting participant contributions, the most common formula is a fixed match only, present in 31.2% of plans (including plans with safe harbor matches). The most common type of fixed match is $0.50 per $1.00 up to the first 6% of pay, present in 29.6% of plans that have fixed matches, PSCA found.

The most common type of company contribution for profit sharing plans is a discretionary profit sharing contribution only, which is present in 65.3% of plans.

Automatic enrollment is utilized by 10.5% of plans, up from 8.4% in 2003. The most common default deferral percentage is 3% of pay, present in 55.8% of plans. Plan loans were permitted in 80.6% of the plans studied.

As for plan services, 42.1% of plans are self-trusted, 36.3% use bank trustees and 21.6% use non-bank trustees. Recordkeeping services are provided most often by third party administrators (34.3%), banks (17.8%) and mutual funds (11.2%).

A copy of the survey report is available for $325 ($125 for PSCA members) by calling (312) 419-1863.