Auto Enrollment, Investment Advice Increasing Trends for K Plans

A PSCA news release said the survey found that auto enrollment was a feature in 10.5% of plans in 2004, up from 8.4% in 2003. The feature was more common in large plans, with 30.6% of plans with 5,000 or more participants having auto enrollment, while .9% of plans with fewer than 50 participants have it.

Investment advice is also increasingly offered in plans, according to the announcement. Advice was offered in 56.6% of plans in 2004, compared to 54.1% in 2003, 51.9% in 2002, and 41.4% in 2001. Companies most commonly offer advice through one-on-one counseling (56.3% of plans), with internet providers (53.5%) and telephone hotlines (34.35%) being the second and third most common methods. Smaller companies tend to prefer the one-on-one method (64.3%), while larger companies prefer the internet (82.5%).

Other findings of the study, according to the release, include:

• 77.3% of eligible employees have balances in their 401(k) plans. Pre-tax participant deferrals average 5.4% of pay for non-highly compensated workers (as defined by the ADP tests) and 6.7% of pay for highly compensated workers.
• Company contributions average 4.5% of payroll. They are highest in profit sharing plans (8.2% of pay) and lowest in 401(k) plans (2.9% of pay).
• For plans with fixed matches, the most common matches are $.50 per $1.00 up to the first 6% of pay (29.6% of plans), $1.00 per $1.00 up to the first 3% of pay (7.2% of plans) and $.25 per $1.00 up to the first 6% of pay (6.5% of plans).
• Catch-up contributions for participants age 50 and over are permitted in 95.3% of plans. 28.7% of these offer a match on the catch-up contributions. The percentage of those making catch-up contributions ranged from 35.5% at the smallest companies to 14.8% at the largest.
• Plans offer an average of 18 funds for participant contributions, up from 17 funds in 2003.
• The funds most commonly offered for participant contributions are actively managed domestic equity funds (77.8% of plans), actively managed international equity funds (71.2% of plans), balanced stock/bond funds (69.3% of plans), and indexed domestic equity funds (67.9% of plans).
• The typical plan has approximately 65% of assets invested in equities. Assets are most frequently invested in actively managed domestic equity funds (31.7% of assets), indexed domestic equity funds (10.3%), stable value funds (9.7%), and balanced stock/bond funds (9.6%).
• Self directed brokerage windows are offered in 15.6% of plans, while open mutual fund windows are offered in 7.3% of plans. 0.5% of plan assets are invested through brokerage windows and 0.3% of plan assets are invested through mutual fund windows.

PSCA’s annual survey reports on the 2004 plan year experience of 1,052 plans with over 9 million participants and more than $500 billion in plan assets. Copies of the survey are available for purchase by visiting www.psca.org .