7 Signs of the Times

A month ago, when we wrote about the 61^st Annual Survey of Profit Sharing and 401(k) Plans from the Plan Sponsor Council of America (PSCA), there were several key points highlighted – but there are some interesting findings you might have overlooked.

Perhaps the most significant finding of that survey – the longest running of its kind – was a record employer contribution rate (5.1% of pay) and a total savings rate in excess of 12%, the highest percentage ever recorded in the history of the survey. Also noteworthy was that nearly three-fourths (73.1%) of plans now retain an independent investment advisor to assist with fiduciary responsibilities – up from 69.5% in 2016.

But here are some findings from the survey of plan sponsors that you might have missed.

There’s less ‘waiting.’

Once upon a time, the norm was to have participants wait a year before letting them participate in the 401(k) plan. There was administrative logic in that decision – after all, turnover rates being what they are, why go to the bother of setting someone up to contribute to the plan (and match those contributions) if they were only going to be around for a short time?

But the most recent PSCA survey finds that nearly half (47.2%) of surveyed employers allow for immediate eligibility, and more than half (55.7%) of the largest plans do. In fact, even among the smallest employers, more than a third (35.3%) let workers become participants immediately.

Not to mention that nearly 40% of plans provide immediate vesting for matching contributions.

Sponsors are making savings suggestions.

Nearly a third (31.2%) of plan sponsor respondents say they provide a suggested saving rate to participants, and for more than 4 in 10 that rate is 10% (28.5%) or higher (12.7%).

There’s a growing role for rollovers.

Just under 4 in 10 (39.4%) of responding plans say they actively encourage participants to roll assets into their plan (though that was somewhat less common among the largest plans). Little wonder, since more than 95% of 401(k) plan sponsors say they accept rollovers from other plans.

There’s a real ‘to or through’ target split.

More than half (55.4%) say their target-date fund goes “through” retirement, while the rest have embraced a “to” retirement glide path. Wonder if participants in those plans appreciate the difference?

Participant behaviors are being tracked.

Not surprisingly, and for any number of legitimate reasons, contribution levels are the most monitored participant behaviors. The vast majority (85%) of the largest plans do so, as do nearly two-thirds (62%) of the smallest. What’s a bit striking is that the second most monitored behavior – and one that held true against nearly all plan sizes (except the smallest, where it was third,after investment allocation) – was loan usage.

Does anything happen with this tracking? About half (45.4%) of plan sponsor respondents said they took action based on what they learned from monitoring participant behaviors.

Traditional success measures (still) matter most.

While more than three-quarters (84.8% of the largest plans) evaluate whether their plan is successful, the benchmarks used are fairly traditional. Participation rates are the most common (90.8% of all plans), with deferral rates (75.8%) looming large, but a distant second. Fewer than a third (31.4%) use income replacement ratios.

Many weren’t looking to make big changes.

More than a third (34.7%) planned no changes at all, and even more (39.9%) planned only “minor changes to the investment lineup.”

- Nevin E. Adams, JD
 
More information about the Plan Sponsor Council of America’s 61st Annual Survey of Profit Sharing and 401(k) Plans is available at www.psca.org.