Data & Research July 2, 2018

Average Deferral Rate Reaches 8.3%

Additionally, the number of plans with an initial 6% deferral rate for automatic enrollment now surpass those with 3% as the initial rate.

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Participants’ average deferral rate in their defined contribution (DC) plans reached 8.3%, the highest in 10 years, according to a new report from T. Rowe Price, “Reference Point.”

Additionally, the number of plans with an initial 6% deferral rate for automatic enrollment (32.4%) surpassed those with 3% as the initial rate (31.9%).

Plans with automatic enrollment had a participation rate 42 percentage points higher than those without (87% versus 45%). Because of the strong markets in 2017, balances increased by an average of $9,583 last year, compared to $2,502 in 2016.

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Loan usage ticked down to 23.4%, and the percentage of people with multiple loans also decreased, to 15.6%, four percentage points lower than in 2013. However, among those 50 and older, the percentage of people with loans increased 2.2%. Loan usage is highest among older Gen Xers and younger Baby Boomers.

Sixty-seven percent of plans offered a Roth option in 2017, up from 60.3% in 2016.  Nearly every age group saw increases in the percentage of participants making Roth contributions, with the largest increases among people between the ages of 20 and 40.

The percentage of people making catch-up contributions reached 12.2%, a 10-year high. Plan sponsor adoption of target-date funds (TDFs) also reached a 10-year high, rising to 94% of plans, and for the first time, TDF assets surpassed assets in all other types of investments.

“We continue to see the significant impact plan design and financial wellness programs have on participant behavior, as evidenced by the increase in both participation and deferral rates and decrease in loan usage,” says Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services. “We’re pleased that plan sponsors have continued to evolve and refine their plans, encouraging positive behaviors with their participants and aligning plan design with their overall retirement benefits philosophy.”

T. Rowe Price’s full “Reference Point” report can be downloaded here.

Compliance July 2, 2018

Matrix Trust Company Accused of Making Unauthorized Transfers of 403(b) Plan Assets

403(b) plan participants have filed a lawsuit against Matrix Trust Company for making several transfers to an unauthorized account held by recordkeeper Vantage Benefits Administrators.

Reported by

Two 403(b) plan participants have filed a lawsuit on behalf of themselves and other similarly situated 403(b) plan participants against Matrix Trust Company for making several transfers to an unauthorized account held by recordkeeper Vantage Benefits Administrators. Matrix was engaged by Vantage to be the custodian for the assets for which Vantage recordkept.

According to the complaint, Matrix executed at least $3 million of unsanctioned transfers from at least five 403(b) plans into a private, Bank of America business account maintained by Vantage or its agents. Matrix is being sued for violating its fiduciary duties because it did not verify that the transfers were authorized by the participants in the 403(b) plans or permissible under the terms of the plans. Assets of the plans for which Matrix was custodian could only be invested in certain mutual funds as specified by the 403(b) plans’ documents, but the bank account maintained by Vantage or its agents was not one of them.

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In a statement, Matrix says, “This lawsuit is completely without merit. Matrix Trust Company did not manage these investment accounts or serve as a trustee or fiduciary for them. This lawsuit involves accounts that were opened and managed by Vantage Benefits Administrators. Matrix’s actions were consistent with its custodial agreements and intends to vigorously defend itself against these baseless claims.”

The lawsuit mentions other pending litigation against both Vantage and Matrix regarding misappropriated funds from Employee Retirement Income Security Act (ERISA) plans. In at least one action, a district court ordered Vantage Benefits and Jeffrey A. Richie to restore more than $10 million for actual damages, plus interest to a retirement plan, as well as to pay attorneys’ fees.

In the newly filed lawsuit, the plaintiffs are asking that Matrix return the improperly transferred assets as well as lost earnings to the retirement plan participants, among other recoverable damages.

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