DC Offerings Increasingly Dominate Retirement Plan Landscape

This trend has been escalating during the previous two years, according to the report.  

Employers continue to evaluate the success of their plans primarily through adequate performance of investments and the adequate facilitation of retirement income for participants, as well as the cost-effectiveness of the plan. This is consistent with 2009 results; however, the performance of investments was ranked higher than historical levels.  

Plan sponsors are still gradually moving away from traditional defined benefit (DB) plans. About half of respondents cover (some or all) salaried employees under a traditional DB pension plan, as well as the DC plan. Twenty-two percent report that salaried employees are also covered with a hybrid DB pension plan. Altogether, 57% of plans offer both a DC plan and DB pension plan (down from 64% in 2009). Additionally, of those with DB plans, 44% of these plans remain open to new hires, down slightly from 46% in 2009.  

In terms of changes to retirement programs, while some employers had cut-backs in their DB plans and/or retiree medical programs during the past two years, many of these same employers have simultaneously enhanced the DC plan. The main form(s) of enrichment reported was introducing a DC matching contribution (13%) and/or non-matching contribution (10%). 

Ninety-five percent of employers consider their plans subject to the Employee Retirement Income Security Act (ERISA). Among these, 81% report that their plans comply with ERISA section 404(c).  

Plan Features  

Eligibility requirements to participate in a 401(k) plan and to receive a company match remained largely consistent in the past two years. About seven in ten plans (71%) provide immediate eligibility, similar to 2009 levels. Further, for employer-matching contributions, more than half (52%) provide corresponding immediate eligibility as well.  

The maximum employee contribution rate continues to climb, with on average a maximum rate of 61% (versus 54% in 2009). The threshold of 50% to 59% is the most prevalent among one-third (32%) of plans. Catch-up contributions are provided among the vast majority of plans, offered by nine out of ten plans. 

Nearly all (93%) of responding employers contribute employer money to their plans, down just slightly from 95% in 2009. Eighty-five percent provide matching contributions (fixed, graded, service, or other). A fixed match remains most prevalent among 63% of plans, while 18% use a graded match. Further, 29% of employers provide non-matching contributions.  

In 2011, the most common type of fixed match is still $0.50 per $1.00 up to a 6% of pay, with 14% of employers reporting this formula. In total, 19% of plans match $0.50 per $1.00 up to a specified percentage of pay. The second most common type of fixed match is $1.00 per $1.00 up to 6% of pay, reported by 10% of plans. A quarter of plans with a fixed match formula reported a $1.00-per-$1.00 match up to a specified percentage of pay.  

Employer contributions continue to immediately vest across 43% of plans; this is static from 2009. The most prevalent vesting schedule remains 3-year cliff vesting (18% of plans), followed by 5-year cliff vesting (16% of plans).