What's New?

Participant Deferral Rate
Rose Slightly

How does your plan compare?

The average participation rate in 401(k) plans was 85.9% at the end of 2011, according to the 55th Annual Survey of Profit Sharing and 401(k) Plans by the Plan Sponsor Council of America (PSCA). (The rate is defined as the average percentage of eligible employees who had a balance in the plan.) The rate the year before was 86.3%. An average of nearly 80% of eligible employees made contributions to the plan in 2011.

The average participant pre-tax deferral rate was 6.4%, compared to 6.2% the year before.

Fast eligibility continued
About 60% of companies permit employees to contribute to the plan immediately upon hire. Almost half (46%) grant immediate eligibility to receive the company match, while 28% require one year of service.

Auto enrollment remained popular
Nearly 46% of plans had an automatic enrollment feature.
The most common default deferral rate was 3% of pay (54% of plans). More than 32% of plans reported a default deferral rate greater than 3%.

Target retirement date funds remained the most common default investment option (70% of plans).

About 55% of plans with automatic enrollment also provide for automatic increases in contribution rates over time.

Roth feature usage rose
About 49% of plans permitted Roth 401(k) contributions, up from 45% the previous year. Of those eligible to make Roth contributions, 17% did so. Based on ADP test results, the average Roth deferral rate of lower-paid participants was 3.7%. For higher-paid participants, the average was 4.9%.

Investment advice still common
Advice was available in almost 58% of plans. About 19% of participants used advice when offered. Small plans tended to have the highest usage.

Other survey results included:

The typical plan had about 61% of assets invested in equities.
Immediate vesting of matching contributions was reported by 39% of plans.
A little over 15% of plans offered company stock as an investment option.
Almost 91% of plans allowed hardship withdrawals,
and about 2% of participants had such a distribution
in 2011.
Loans were permitted in 89% of plans. More than half of these plans (54%) allow only one loan at a time.
About 68% of plans retained an independent investment advisor to provide guidance on fiduciary responsibility.

The survey reflects 2011 experience of 10.3 million participants
in 840 plans that had a total of more than $753 billion in
plan assets.

The survey may be ordered from the PSCA at www.psca.org.