Comparing your plan to others’ can be an enlightening and useful experience. Each year, you have that opportunity, by reviewing the data in a popular industry survey. For example, the average participation rate in 401(k) plans was 89% at the end of 2013.* (The rate is defined as the average percentage of eligible employees who had a balance in the plan.) The rate the year before was 88%. An average of nearly 80% of eligible employees made contributions to the plan in 2013.
The average participant pretax deferral rate was 6.7%, compared to 6.8% the year before.
Fast eligibility continued
About 64% of companies permit employees to contribute to the plan immediately upon hire. Almost two-thirds (58%) grant immediate eligibility to receive the company match, while 30% require one year of service.
Auto-enrollment remained popular
About 50% of plans had an automatic enrollment feature.
The most common default deferral rate was 3% of pay (47% of plans). More than 40% of plans reported a default deferral rate greater than 3%.
Target retirement date funds remained the most common default investment option (72% of plans).
About 65% of plans with automatic enrollment also provide for automatic increases in contribution rates over time.
Roth feature usage rose
About 58% of plans permitted Roth 401(k) contributions, up from 54% the previous year. Based on ADP test results, the average Roth deferral rate of lower-paid participants was
3%. For higher-paid participants, the average was 2.6%.
Number of investment options was unchanged
The average number of investment choices offered to participants remained 19.
Other survey results
- More than 87% of plans had an investment policy statement. Monitoring of investments was done most often on a quarterly basis (67% of plans).
- Immediate vesting of matching contributions was reported by 38% of plans.
- A little over 19% of plans offered company stock as an investment option.
- Almost 86% of plans allowed hardship withdrawals, and about 2% of participants had such a distribution in 2013.
- Loans were permitted in 89% of plans. More than half of these plans (52%) allow only one loan at a time. The average loan balance was $10,385.
- Rollovers were accepted in nearly 98% of plans. Nearly two-thirds of plans (59%) require employees to be eligible to make elective deferrals before they can roll over assets into the plan.
- Catch-up contributions were permitted in 97% of plans. About 25% of those eligible for these contributions made catch-up contributions.
The survey results reflect the 2013 experience of 8 million participants in 613 plans that had a total of more than $832 billion in plan assets.
The survey may be purchased from the PSCA at www.psca.org.
* 57th Annual Survey of Profit Sharing and 401(k) Plans by the Plan Sponsor Council of America (PSCA), published December 3, 2014.
For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
© 2015 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
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