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CCH® PENSION — 10/07/09

PSCA Releases Annual Survey Of Profit-Sharing And 401(k) Plans

From Spencer's Benefits Reports: The Profit Sharing/401k Council of America (PSCA) has released its 52nd Annual Survey of Profit Sharing and 401(k) Plans, which provides up-to-date information on current practices and trends in profit-sharing and 401(k) plans. The PSCA’s survey reports on the 2008 plan year experience of 908 plans covering 7.4 million participants with more than $600 billion in plan assets.

Highlights from the survey include the following:

Automatic enrollment. Following a large increase in 2007, the rate of addition of automatic enrollment continued at a slower rate in 2008. The survey found that 39.6% of all plans and more than half of large plans currently use automatic enrollment.

Asset allocation. The typical plan had approximately 60% of assets invested in equities, down only 5% from 2007. Assets were most frequently invested in actively managed domestic equity funds (23.1% of assets), stable value funds (13.7%), target retirement date funds (8.4%), indexed domestic equity funds (8.3%), actively managed international equity funds (7.7%), and balanced stock/bond funds (7.7%).

Company contributions. Company contributions averaged 4.1% of payroll, the same as in 2007. Company contributions were highest in profit-sharing plans (9.3% of pay) and lowest in 401(k) plans (2.9% of pay). One percent of respondents indicated that they suspended their employer match.

Numerous formulas were used to determine company contributions. In plans permitting participant contributions, the most common formula was a fixed match only, present in 24.0% of plans. For plans with fixed matches, half of plans matched $0.50 per $1, most commonly up to the first 6% of pay (29.0% of plans). Among profit-sharing plans, the most common type of company contribution was a discretionary profit-sharing contribution only, which was present in 67.9% of plans.

Employee participation. The survey found that 82.7% of eligible employees had balances in their 401(k) plans, up from 81.9% in 2007. Pretax participant deferrals averaged 5.5% of pay for nonhighly compensated workers and 6.6% of pay for highly compensated workers.

Investment options. The number of funds offered to plan participants plateaued in 2008. Plans offered an average of 18 funds for participant contributions. The funds most commonly offered for participant contributions were actively managed domestic equity funds (used by 81.3% of plans), actively managed international equity funds (78.5% of plans), indexed domestic equity funds (70.2% of plans), and actively managed domestic bond funds (65.8% of plans). Overwhelmingly, money is managed in mutual funds, although larger companies also use collective trusts and separately managed accounts.

Investment advice. The availability of investment advice continued to increase in 2008; for the first time, more than half of all plans (51.8%) offered investment advice to participants. More small companies offered investment advice than large companies.

Small preretirement distributions. Half of plans transfer balances between $1,000 and $5,000 to an individual retirement account and paid out balances of less than $1,000. Forty percent of plans retained balances of more than $1,000 in the plan, and 10% of plans retained all small balances in the plan.

Roth 401(k) feature. The survey found that 36.7% of plans permitted Roth 401(k) contributions, up from 30.3% in 2007. Of those eligible to make Roth contributions, 15.6% are doing so.

Target-date funds. The availability and use of target-date funds continued to grow in 2008: 57.7% of plans offered them; 91.6% of companies offering target-date funds used a packaged product. Larger companies were more likely to customize their own funds.

Self-directed accounts. Self-directed brokerage windows were offered in 15.5% of plans, while open mutual fund windows were offered in 8.3% of plans. On average, plans invested 2.2% of plan assets through brokerage windows and 1.5% through mutual fund windows.

Safe-harbor plan design. According to the survey, 23.6% of plans offered a safe-harbor match, and 6% of plans offered an elective safe-harbor contribution. Of plans that offer a safe-harbor match, 30.4% offered the automatic enrollment safe-harbor match.

Vesting. Immediate vesting was used for matching contributions in 37.1% of plans and for nonmatching contributions in 26.1% of plans. Among plans that did not have immediate vesting, graduated vesting tended to be the most common arrangement for all plan types.

The PSCA survey is available for purchase for $375 for nonPSCA members and $145 for members. The survey can be ordered online at http://www.psca.org or via telephone at (312) 419-1863.

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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