Plan contributions bounced back in 2011, PSCA survey shows

 

More companies and participants are putting money into their plans and they doing so at higher rates than in previous years, according to the 55th Annual Survey of Profit Sharing and 401(k) Plans released by the Plan Sponsor Council of America (PSCA).

The PSCA survey, which reports on the 2011 plan-year experience of 840 plans representing 10.3 million participants and $753 billion in assets, showed improvement in all key confidence indicators. The percentage of companies that made the matching contribution, when provided for in the plan, increased to 95.5% (up from 91% in 2010). The percentage of eligible employees making contributions to the plan also showed improvement, increasing from 76.9% in 2010 to 79.5%. In addition to the increased number of companies and participants making contributions to the plan, the average amount of the contributions also showed improvement, the survey revealed. The average company contribution increased to 4.1% of pay (up from 3.7% in 2010), and the average participant deferral rate increased from 6.2% to 6.4% of pay.

“The continued upward trend in participation and contribution levels is a result of the ongoing, sustained efforts of plan sponsors to effectively communicate their plan and educate their participants on the benefits of enrolling and staying in the plan,” said Bob Benish, PSCA’s Interim President and Executive Director. “Sponsors are looking beyond just increasing participation rates and are embracing plan design features that will make the plan more attractive to employees, while also making the plan more effective at increasing overall retirement readiness and financial health.”

Plan design features

According to the survey, plan design features focused on increasing overall participant outcomes continued to grow in popularity, following the trend of the past few years.

The availability of target date funds increased from 61.5% to 68.6% of plans, the survey reported. Roth after-tax contributions are now permitted in nearly half of plans (49%), up from 45.5% in 2010.

The survey found that automatic enrollment is used by 45.9% of plans (up from 41.8% in 2010). The percentage of auto-enrollment plans with a default deferral rate greater than 3% increased from 25.8% of plans in 2010 to 32.2%.

Hardship distributions and loans

The survey found that hardship withdrawals are permitted in 90.5% of 401(k), 87.4% of combination, and 5.9% of profit-sharing plans. Less than 2% of participants took a hardship withdrawal in 2010, when permitted.

Loans are permitted in 89% of 401(k), 88.4% of combination, and 17.6% of profit-sharing plans. Over half (54%) of plans with loans permit only one loan at a time.

Investment advice

The survey found that investment advice is offered by 57.8% of respondent companies. Less than one-fifth (19.3%) of participants used advice when it was offered.

A little over two-thirds (68.2%) of companies retain an independent investment advisor to assist with fiduciary responsibility, according to the PSCA.

Investment options

Plans offer an average of 19 funds for both participant contributions and for company contributions, the survey found. The funds most commonly offered to participants are actively managed domestic equity funds (90.3% of plans), actively managed international equity funds (87.4%), indexed domestic equity funds (82.8%), and actively managed domestic bond funds (79.6%).

Source: PSCA press release, October 11, 2012.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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