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CCH® PENSION — 10/10/08

PSCA’s Annual Survey Of 401(k) And Profit-Sharing Plans Finds Increase In Automatic Enrollment

From Spencer's Benefits Reports: The Profit Sharing/401k Council of America (PSCA) has released its 51st 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 survey reports on the 2007 plan year experience of 1,011 plans with 7.4 million participants and more than $730 billion in plan assets.

Following are some highlights from the survey:

Automatic enrollment. Following a sizeable increase in 2006, more plans of all sizes added automatic enrollment in 2007. More than half of large plans utilized this feature and usage by small plans doubled.

Asset allocation. The typical plan had approximately 65% of assets invested in equities. Assets most frequently were invested in actively managed domestic equity funds (29.1% of assets), indexed domestic equity funds (10.0%), stable value funds (8.6%), and balanced stock/bond funds (8.0%).

Catch-up contributions. Catch-up contributions for participants age 50 and older were permitted in 99.1% of plans; 33.5% of these plans offered a match on the catch-up contributions. The percentage of eligible employees who made catch-up contributions ranged from 43.1% at the smallest companies to 12.0% at the largest firms.

Company contributions. Company contributions averaged 4.4% of payroll. Company contributions were highest in profit-sharing plans (8.6% of pay) and lowest in 401(k) plans (3.2% of pay). Numerous formulas were used to determine company contributions. In plans permitting participant contributions, the most common formula was a fixed match only, present in 24.8% of plans (including plans with safe harbor matches). For plans with fixed matches, the most common matches were $0.50 per $1 up to the first 6% of pay (used by 26.2% of plans), $1 per $1 up to the first 4% of pay (10.4% of plans), and $1 per $1 up to the first 3% of pay (8.1% of plans).

Employee participation. The survey found that 81.9% of eligible employees have balances in their 401(k) plans. Pretax participant deferrals averaged 5.6% of pay for nonhighly compensated employees (the first increase since 2004) and 7.0% of pay for highly compensated employees.

Investment fund structure. Overwhelmingly, plan assets were managed in mutual funds, although larger companies also used collective trusts and separately managed accounts.

Investment options. The number of funds offered to plan participants has plateaued; plans offered an average of 18 funds for participant contributions. The funds most commonly offered for participant contributions were actively managed domestic equity funds (offered by 76.8% of plans), actively managed international equity funds (73.4% of plans), indexed domestic equity funds (70.4% of plans), and actively managed domestic bond funds (63.8% of plans).

Roth 401(k) contributions. According to the survey, 30.3% of plans permitted Roth 401(k) contributions, and 12.6% of those eligible were making such contributions.

Self-directed accounts. Self-directed brokerage windows were offered in 15.6% of plans, while open mutual fund windows were offered in 5.3% of plans. Only 2.0% of plan assets were invested through brokerage windows, and 0.9% of plan assets were invested through mutual fund windows.

Vesting. Immediate vesting was used for matching contributions in 43.6% of plans and for nonmatching contributions in 20.0% of plans. Among plans that did not have immediate vesting, graduated vesting tended to be the most common arrangement for all plan types.

The survey covered a wide variety of topics, including data on participation rates, catch-up contributions, company contributions, asset allocation, investment options, company stock, professional management, investment advice, and automatic enrollment. The survey is available for purchase for $375 for non-PSCA members and $145 for members. To order a copy, contact the PSCA at (312) 419-1863 or via the Internet at 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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