PSCA Releases 52nd Annual Survey of Profit Sharing and 401k Plans
CHICAGO, IL, September 28, 2009 -- The Profit Sharing/401k Council of America (PSCA), a national nonprofit association committed to retirement savings through employee-sponsored defined contribution programs, has released its 52nd Annual Survey of Profit Sharing and 401k Plans, which provides the most up-to-date information available on current practices and trends in profit sharing and 401k plans.
"Even in this economic period, plan sponsors remain committed to improving their plans. Participants continued to save and invest for the long term," said David Wray, president of PSCA. "401k was an island of stability in a sea of economic uncertainty."
PSCA's Annual Survey reports on the 2008 plan-year experience of 908 plans with 7.4 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:
Automatic Enrollment
Following a big increase in 2007, the rate of addition of automatic enrollment has slowed but continued. 39.6 percent of all plans and more than half of large plans currently use automatic enrollment.
Asset Allocation
The typical plan has approximately 60 percent of assets invested in equities, down only 5 percent from 2007. Assets are most frequently invested in actively managed domestic equity funds (23.1 percent of assets), stable value funds (13.7 percent), target retirement date funds (8.4 percent), indexed domestic equity funds (8.3 percent), actively managed international equity funds (7.7 percent), and balanced stock/bond funds (7.7 percent).
Company Contributions
Company contributions average 4.1 percent of payroll, the same as in 2007. They are highest in profit sharing plans (9.3 percent of pay) and lowest in 401k plans (2.9 percent of pay). One percent of respondents indicated that they suspended their employer match. Numerous formulas are used to determine company contributions. In plans permitting participant contributions, the most common formula is a fixed match only, present in 24.0 percent of plans. For plans with fixed matches, half of plans match $0.50 per $1.00, most commonly up to the first 6 percent of pay (29.0 percent of plans). Among profit sharing plans, the most common type of company contribution is a discretionary profit sharing contribution only, which is present in 67.9 percent of plans.
Employee Participation
82.7 percent of eligible employees have balances in their 401k plans, up from 81.9 percent in 2007. Pre-tax participant deferrals average 5.5 percent of pay for non-highly compensated workers and 6.6 percent of pay for highly compensated workers.
Investment Options
The number of funds offered to plan participants has plateaued. Plans offer an average of 18 funds for participant contributions. The funds most commonly offered for participant contributions are actively managed domestic equity funds (81.3 percent of plans), actively managed international equity funds (78.5 percent of plans), indexed domestic equity funds (70.2 percent of plans), and actively managed domestic bond funds (65.8 percent of plans).
Investment Fund Structure
Overwhelmingly, money is managed in mutual funds, although larger companies also use collective trusts and separately managed accounts.
Investment Advice
The availability of investment advice continues to increase; for the first time, more than half of all plans (51.8 percent) offer investment advice to participants. More small companies offer investment advice than large companies.
Small Pre-Retirement Distributions
Half of plans transfer balances between $1,000 and $5,000 to an IRA and pay out balances less than $1,000. 40 percent of plans retain balances of more than $1,000 in the plan, and 10 percent of plans retain all small balances in the plan.
Roth 401k
36.7 percent of plans permit Roth 401k contributions, up from 30.3 percent in 2007. 15.6 percent of those eligible to make Roth contributions are doing so.
Target-Date Funds
The availability and use of target-date funds continues to grow. 57.7 percent of plans now offer them. 91.6 percent of companies offering target-date funds use a packaged product. Larger companies are more likely to customize their own funds.
Self-Directed Accounts
Self-directed brokerage windows are offered in 15.5 percent of plans, while open mutual fund windows are offered in 8.3 percent of plans. On average, plans invest 2.2 percent of plan assets through brokerage windows and 1.5 percent through mutual fund windows.
Safe Harbor Plan Design
23.6 percent of plans offer a safe harbor match, and 6 percent of plans offer an elective safe harbor contribution. Of plans that offer a safe harbor match, 30.4 percent offer the automatic enrollment safe harbor match.
Vesting
Immediate vesting is present for matching contributions in 37.1 percent of plans and for non-matching contributions in 26.1 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 52nd Annual Survey of Profit Sharing and 401k Plans is available for purchase for $375 for non-PSCA members and $145 for members. Order online at www.psca.org 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 six million employees, advocates increased retirement security through profit sharing, 401k, and related defined contribution programs to federal policymakers. PSCA makes practical assistance available to its members with profit sharing and 401k plan design, administration, investment, compliance, and communication materials. 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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