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CCH® PENSION AND BENEFITS — 10/4/06

PSCA releases 49th annual profit-sharing, 401(k) survey

The latest annual survey from the Profit Sharing/401k Council of America (PSCA) indicates a continued increase in the use of automatic enrollment arrangements. The 49th Annual PSCA survey contains information on the 2005 plan year experience for over six million participants, including those in 51 profit-sharing plans, 530 401(k) plans, and 525 combination profit-sharing/401(k) plans.

According to the survey results, 77.7% of employees studied that were eligible to participate in 401(k) plans did so, with average deferrals of 5.4% of pay for non-highly compensated participants and 6.9% of pay for higher compensated participants. Company contributions averaged 4.7% of payroll. Contributions were highest in profit-sharing plans (9.4% of payroll and 16.2% of total net profit) and lowest in 401(k) plans (2.8% of payroll and 8.8% of total net profit).

Investments of plan assets

Eighty percent of plans included in the PSCA study offered actively managed domestic equity funds, and these were the type of fund in which assets were most frequently invested (32%). Other commonly offered funds were actively managed international equity funds (in 74.8% of plans), indexed domestic equity funds (in 71.3% of plans), and balanced stock/bond funds (in 67.5% of plans). Just under ten percent of plan assets were invested in indexed domestic equity funds and 9.2% were invested in balanced stock/bond funds.

Automatic enrollment

Automatic plan enrollment was up in 2005, to 16.9% of surveyed plans, from 10.5% in 2004. The most common automatic default deferral percentage is three percent of pay.

Loans

The great majority (85.2%) of 401(k) plans permit loans, as do 87.3% of combination plans, and 31.4% of profit-sharing plans. Almost a quarter of participants in plans that permit loans have loans, and loaned assets in such plans account for 2.4% of total plan assets. The average loan is $7,407 per borrower.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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