Sponsors, Participants Put More into Plans

The PSCA’s 55th Annual Survey of Profit Sharing and 401(k) Plans finds the percentage of companies that made the matching contribution, when provided for in the plan, increased to 96% (up from 91% in 2010). The survey’s results are based on the 2011 plan-year experience of 840 plans representing 10.3 million participants and $753 billion in assets. Small companies in particular are bringing back the match, with 93% of companies with fewer than 200 participants making the match in 2011, versus only 83% in 2010. The percentage of eligible employees making contributions to the plan increased from 77% in 2010 to 80%.

In addition, the average amount of the contributions showed improvement. The average company contribution increased to 4.1% of pay (up from 3.7% in 2010), and the average participant deferral rate ticked up, from 6.2% to 6.4% of pay.

Eighty-eight percent of U.S. employees at respondent companies are eligible to participate in their employer’s defined contribution plan. Most companies allow employees to begin contributing to the plan immediately upon hire (60%). The average percentage of eligible employees who have a balance in the plan is 86%. An average of 80% of eligible employees made contributions to the plan in 2011, when permitted.

Plan design features focused on increasing overall participant outcomes continued to grow in popularity:

Target-Date Funds: Availability increased from, 61.5% to 68.6% of plans. The average allocation of plan assets is 12%.

Roth 401(k):  Roth after-tax contributions are now permitted in nearly half of plans (49%), up from 46% in 2010. Seventeen percent of participants made Roth contributions when offered the opportunity. The average Roth deferral (from ADP test results) was 4% by lower-paid participants and 5% by higher-paid participants.

Automatic Enrollment: Automatic enrollment (AE) is used by 46% of plans (up from 42% in 2010). The percentage of AE plans with a default deferral rate greater than 3% increased from 26% of plans in 2010 to 32%. The most common default investment option is a target-date fund, present in 70% of plans.

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The PSCA survey also found investment advice is offered by 58% of respondent companies. Nineteen percent of participants used advice when it was offered. Participant usage tends to be greatest in small plans.

Plans offer an average of 19 funds for both participant contributions and for company contributions. The funds most commonly offered to participants are actively managed domestic equity funds (90% of plans), actively managed international equity funds (87%), indexed domestic equity funds (83%), and actively managed domestic bond funds (80%).

The average plan has approximately 61% of assets invested in equities. Assets are most frequently invested in actively managed domestic equity funds (24.8% of assets), target-date funds (12%), stable value funds (11%), indexed domestic equity funds (9%), and actively managed bond funds (8%).

More than 15% of plans allow company stock as an investment option for both participant and company contributions.

Other survey findings include:

Hardship withdrawals are permitted in 91% of 401(k), 87% of combination, and 6% of profit sharing plans; 2% of participants took a hardship withdrawal in 2010, when permitted.

Loans are permitted in 89% of 401(k), 88.4% of combination, and 18% of profit sharing plans; 54% of plans with loans permit only one loan at a time.

39% of plans provide immediate vesting for matching contributions, while 24% provide immediate vesting for profit sharing contributions.

68% of companies retain an independent investment adviser to assist with fiduciary responsibility.

The full report is available for purchase at www.psca.org.