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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
from Spencer’s Benefits Reports: The average profit sharing/401(k) plan has approximately 60% of assets invested in equities, according to the Profit Sharing/401k Council of America’s (PSCA) 53rd Annual Survey of Profit Sharing and 401(k) Plans. Assets are most frequently invested in actively managed domestic equity funds (28.9% of the assets), target retirement date funds (10.3%), and stable value funds (9.7%).
As markets fluctuated and the 401(k) system came under pressure, plan sponsors responded proactively with an increased concentration on plan investments. Plan investments are more frequently monitored with 64.4% of the plan sponsors reviewing investments quarterly. The majority of plans (85.8%) have an investment policy statement—up from 54.3% ten years ago. In 2009, 20% of plans made changes to their investment lineup.
In addition to more closely monitoring investments, plan sponsors worked to help participants make good investment choices. PSCA found that 31.4% of the plans offered a professionally managed alternative, up from 26.2% in 2008. In addition, 60.1% of the plans offered investment advice to participants (a 20% increase from 2008), with 21.6% of the participants using it when offered. Participant usage tends to be greatest in small plans, the survey found. A target-date fund was offered in 62.3% of the plans the plan—a 40% increase over the last two years.
“Plan sponsors stepped up to the plate to help participants through this difficult economic time and to ensure that their plan meets the needs of their employees,” said David Wray, president of the PSCA. “This is one of the unique attributes of the 401(k) system—participants have an informed advocate working on their behalf in their employer.”
Below are some additional highlights from the survey:
Investment Options. The number of funds offered to plan participants appears to be leveling out after many years of steady increase. In 2009, plans offered an average of 18 funds for both participant and company contributions. The funds most commonly offered were actively managed domestic equity funds (87.3% of the plans), actively managed international equity funds (86.0% of the plans), and indexed domestic equity funds (82.4% of the plans).
Company Contributions. The average company contribution in 401(k) plans was 2.1% of pay and in combination plan,s it was 4.7% of pay.
Company Stock. PSCA found that 13.8% of plans allowed company stock as an investment option for participant and company contributions; 3.1% of the plans allowed company stock as an investment option for company contributions only; 26.4% of the plans limited the amount of plan assets that can be invested in company stock; and 35.8% of the plans made matching company contributions in company stock. An average of 18.1% of total plan assets was invested in company stock.
Automatic Enrollment. Slighly more than 38% of the plans have an automatic enrollment feature, according to the survey. Automatic enrollment was most common in large plans—53.7% of the plans with 5,000 or more participants reported employing automatic enrollment. The most common default deferral was 3% of pay, used in 58% of the plans. In addition, 53.1% of the plans automatically increased the default deferral percentage over time. The most common default investment option was a target retirement date fund (57.0% of the plans).
Hardship Distributions. Hardship withdrawals were permitted in 85.6% of the plans. The most common reasons for permitting hardship withdrawals included the purchase of a primary residence or to prevent eviction or foreclosure (97.9%), medical expenses (97.2%), and post-secondary education expenses (93.5%). The survey found that 1.9% of the participants took a hardship withdrawal in 2009, when permitted.
Loans Availability. Loans were permitted in 90.2% of the 401(k) plans, 35.5% of the profit-sharing plans, and 86.6% of the combination plans. Only one loan at a time was permitted in 51.9% of the plans with loans. In plans with a loan feature, an average of 23.1% of the participants had loans outstanding, with an average loan amount of $8,760. Loans accounted for 2.5% of total plan assets among plans with loans.
Roth 401(k). Among plans that permitted participant contributions, 41.3% allowed participants to make Roth after-tax contributions, and 13.0% of the participants made Roth contributions when offered the opportunity.
PSCA’s Annual Survey reported on the 2009 plan-year experience of 931 plans with 8.6 million participants and more than $628 billion in plan assets. The survey is available for $375 for non-PSCA members and $145 for members. For more information, visit http://www.psca.org.
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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