Summary of PSCAs Annual 401k Survey
CHICAGO, IL, September 24, 2007 -- The Profit Sharing/401k Council of America (PSCA), a national nonprofit association committed to retirement savings through employee-sponsored defined contribution programs, is sponsoring National 401k Day on September 7. Now in its 12th year, 401k Day is an annual celebration that encourages employers to set aside time at the workplace to spotlight the importance of their 401k plans.
"The trend toward greater sponsor involvement in plans continues," said David Wray, president of PSCA. "The increase in the number of companies utilizing automatic enrollment has been especially strong."
PSCA's annual survey reports on the 2006 plan year experience of 1,000 plans with more than six million participants and more than $600 billion in plan assets. Plans represented in the survey are diverse, representing companies of all sizes and regions across the United States.
The survey covers a wide variety of topics relevant to plan sponsors and the industry at large, including data on participation rates, catch-up contributions, company contributions, asset allocation, investment options, company stock, professional management, investment advice, automatic enrollment, and more. PSCA's annual surveys are frequently used by companies to provide benchmarks for their plans and by the government as a resource for public policy decisions.
Below are some highlights from the survey:
Roth 401k
18.4 percent of plans permit Roth 401k contributions. 11.6 percent of those eligible are doing so.
Employee Participation
77.7 percent of eligible employees have balances in their 401k plans. Pre-tax participant deferrals average 5.4 percent of pay for non-highly compensated workers (as defined by the ADP tests) and 6.9 percent of pay for highly compensated workers.
Company Contributions
Company contributions average 4.7 percent of payroll. They are highest in profit sharing plans (9.2 percent of pay) and lowest in 401k plans (3.0 percent of pay).
Numerous formulas are used to determine company contributions. In plans permitting participant contributions, the most common formula is a fixed match only, present in 29.5 percent of plans (including plans with safe harbor matches).
For plans with fixed matches, the most common matches are $.50 per $1.00 up to the first 6 percent of pay (32.2 percent of plans), $1.00 per $1.00 up to the first 4 percent of pay (9.8 percent of plans) and $1.00 per $1.00 up to the first 3 percent of pay (8.5 percent of plans).
Catch-up Contribution
Catch-up contributions for participants aged 50 and older are permitted in 98.0 percent of plans. 31.0 percent of these plans offer a match on the catch-up contributions. The percentage of those making catch-up contributions ranged from 42.3 percent at the smallest companies to 17.9 percent at the largest.
Investment Options
The number of funds offered to plan participants have plateaued. Plans offer an average of 19 funds for participant contributions, up from 18 funds in 2004 and 17 funds in 2003.
The funds most commonly offered for participant contributions are actively managed domestic equity funds (78.8 percent of plans), actively managed international equity funds (75.8 percent of plans), indexed domestic equity funds (71.8 percent of plans), and balanced stock/bond funds (64.8 percent of plans).
Asset Allocation
The typical plan has approximately 70 percent of assets invested in equities. Assets are most frequently invested in actively managed domestic equity funds (30.6 percent of assets), indexed domestic equity funds (10.3 percent), balanced stock/bond funds (8.2 percent), and stable value funds (8.9 percent).
Self-Directed Accounts
Self-directed brokerage windows are offered in 13.6 percent of plans, while open mutual fund windows are offered in 5.6 percent of plans. 1.9 percent of plan assets are invested through brokerage windows, and 1.6 percent of plan assets are invested through mutual fund windows.
Automatic Enrollment
Following the big increase of 2005, a large number of plans of all sizes added automatic enrollment in 2006. Usage is now common in large plans where 41.3 percent have adopted the feature.
Vesting
Immediate vesting is present for matching contributions in 39.5 percent of plans and for non-matching contributions in 20.0 percent of plans. Among plans that do not have immediate vesting, graduated vesting tends to be the most common arrangement for all plan types.
PSCA's 50th Annual Survey of Profit Sharing and 401k Plans is available for purchase for $325 for non-PSCA members and $125 for members. Order online or call (312) 419-1863.
About the Profit Sharing/401k Council of America
The Profit Sharing/401k Council of America (PSCA), a national non-profit association of 1,200 companies and their 6 million employees, advocates increased retirement security through profit sharing, 401k and related defined contribution programs to federal policymakers and makes practical assistance with profit sharing and 401k plan design, administration, investment, compliance and communication available to its members. PSCA, established in 1947, is based on the principle that "defined contribution partnership in the workplace fits today’s reality." PSCA's services are tailored to meet the needs of both large and small companies with members ranging in size from Fortune 100 firms to small, entrepreneurial businesses.
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