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U.S. Master™ Pension Guide, 2009 Edition
Revised for 2009 to include relevant provisions of the Heroes Earnings Assistance Relief Tax (HEART) Act and the Emergency Economic Stabilization Act.

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CCH® PENSION AND BENEFITS — 11/16/07

Individual account plans show continued growth, EBRI reports

Individual account plans, such as 401(k) plans and IRAs, have continued to increase their share of retirement assets, and this share is projected to grow, particularly for private-sector employees, according to a study published by the Employee Benefit Research Institute (EBRI).

The most recent data show that, as of 2006, about $7.5 trillion in assets were held in IRAs and defined contribution plans, such as 401(k) plans, up from about $4.8 trillion in 2000. The percentage of employees owning a 401(k)-type plan or IRA has also risen significantly, according to the study. Just over 40% of workers ages 21-64 owned a 401(k)-type plan or IRA in 2004, up from 34% in 1996.

Growth in DC plans has “topped out”

The EBRI study also reports that the sharp increase in the number of defined contribution plans and the number of participants in such plans, which had grown steadily throughout the 1990s, had leveled off by 2004. The number of DC plans reached almost 687,000 in 2000 and was down to less than 636,000 in 2004. The number of DC participants reached 52.9 million in 2002 and was down to 52.2 million in 2004.

Contributions to individual account retirement plans are strongly influenced by demographic factors, chiefly income, education, and race, according to the EBRI study.

Rollovers are major source of IRA growth

The EBRI study also found that about 38% of IRA owners contributed the maximum amount allowed by law, almost half the rate in 1996. Most new IRA contributions are going to nondeductible Roth IRAs, not traditional IRAs. The major source of IRA growth continues to be rollovers from other tax-qualified retirement plans, rather than new contributions.

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