Data and Research

Plan Designs Change, But DC Commitment Remains Strong

Simple matching formulas are the most common type of employer contribution—found in 45% of 401(k) plans in the BrightScope database.

By John Manganaro | December 20, 2016
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A new report from BrightScope and the Investment Company Institute (ICI) finds the great majority of employers that sponsor 401(k) plans—more than three-quarters—contribute to their plans to promote employee financial wellness.

The in-depth study, “The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2014,” shows employers use a range of formulas when they provide matching contributions. It also reveals that plan sponsors offer a wide variety of investment choices and that mutual fund fees in 401(k) plans have trended down.

Data from the study was drawn from the Department of Labor (DOL) on a wide range of private-sector 401(k) plans, with additional detailed investment data drawn from the BrightScope Defined Contribution Plan Database, which covers nearly 30,000 large 401(k) plans.

“The study underscores how the 401(k) plan’s flexible structure permits employers to configure their own plan designs to encourage employee participation and meet the needs of their workforces,” observes Sarah Holden, ICI’s senior director of retirement and investor research and a researcher on the study. “As the 401(k) market evolves, plan sponsors revisit and refine their plan designs and remain committed to promoting retirement saving, offering a wide range of investment choices, and often making contributions to the plans.”

Looking across the universe of 401(k) plans, the analysis finds that employers contributed about one-third, or $115 billion, of total 401(k) plan dollars invested in 2014. In nearly all (95%) of the large plans with 5,000 participants or more, the employer contributed in 2014, while more than three-quarters of small 401(k) plans with fewer than 100 participants featured employer contributions.

NEXT: Additional findings highlight sponsor shifts