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CCH® PENSION — 10/16/09

Employers and employees keep commitment to 401(k) plans: PSCA survey

Plan sponsors and participants continue to maintain their commitment to 401(k) plans despite the turbulent economy, according to the 52nd Annual Survey of Profit Sharing and 401(k) Plans released by the Profit Sharing/401k Council of America (PSCA). The survey, which measured the 2008 plan-year experience of 908 plans with 7.4 million participants, provides data on a wide variety of topics, including participation rates, catch-up contributions, company contributions, asset allocation, investment options, company stock, professional management, investment advice, and automatic enrollment.

"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 the PSCA. "401(k) was an island of stability in a sea of economic uncertainty," he added.

Automatic enrollment and asset allocation

The PSCA survey found that, following a big increase in 2007, the rate at which employers added automatic enrollment to their 401(k) plans continued, but at a slower pace in 2008. Nearly 40% of all plans and more than half of large plans currently use automatic enrollment.

According to the survey, the typical plan has approximately 60% of assets invested in equities, down only 5% from 2007. Assets are most frequently invested in actively managed domestic equity funds (23.1% of assets), stable value funds (13.7%), target retirement date funds (8.4%), indexed domestic equity funds (8.3%), actively managed international equity funds (7.7%), and balanced stock/bond funds (7.7%).

Contributions and participation

Employer contributions average 4.1% of payroll, the same as in 2007, the survey found, with the highest contributions in profit-sharing plans (9.3% of pay) and lowest in 401(k) plans (2.9% of pay). One percent of respondents indicated that they suspended their employer match.

The survey found the most common formula for employer contributions to be a fixed match only, present in 24% of plans. For plans with fixed matches, half of plans matched fifty cents on the dollar, most commonly up to the first 6% of pay. Among profit-sharing plans, the most common type of company contribution was a discretionary profit-sharing contribution only, present in 67.9% of plans.

Investment advice

The survey found that the availability of investment advice within plans continues to increase. For the first time, more than half of all plans (51.8%) now offer investment advice to participants. The survey found that more small companies offer investment advice than large companies.

Source: PSCA news release, September 28, 2009..

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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