Participants February 11, 2015

DC Plan Trading Activity Picked Up in January

A volatile start to the year on Wall Street fueled higher-than-usual trading activity among defined contribution plan participants in January, according to Aon Hewitt.
Reported by

Aon Hewitt’s 401(k) Index shows there were five days of above-normal trading activity among defined contribution (DC) plan participants in the month of January 2015–more days than the previous two months combined.

Overall, Aon Hewitt finds 0.027% of total DC assets traded in January. The majority of days (75%) favored equities over fixed-income assets, the index shows, which is the highest percentage of days per month favoring equities in two years.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

As explained by Aon Hewitt, a “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Aon Hewitt 401(k) Index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

Index results also show participants widely made trades out of stable value, money market funds and target-date funds (TDFs) and transferred into bonds, company stock and specialty/sector funds. Despite the slight slowdown, TDFs continue to receive the majority of new contributions into individuals’ accounts. Large U.S. equities received 19% of contributions during the month, followed by stable value funds, with 8% of the monthly contributions for January.

Combining contributions, trades and market activity, participants’ overall allocation to equities decreased to 65.6% from 66.4% in January. Future contributions to equities increased marginally month-over-month, from 66.1% to 66.4%.

The index shows the global equity markets had an unstable start to the year. The S&P 500 Index had its worst monthly showing since January 2014, returning -3.0%. Small-cap equities also had a rough month as the Russell 2000 Index returned -3.2%. Non-U.S. equities performed better than their U.S. counterparts during January but still declined, Aon Hewitt says, returning -0.2%. The Barclays U.S. Aggregate Index, a measure of the fixed income market, returned 2.1% during the month.

More information is here.

Participants February 11, 2015

Most DC Plan Participants Leave Balances Untouched in 2014

Fewer participants changed their defined contribution plan asset allocations in 2014 than in 2013.
Reported by

A report of defined contribution (DC) plan participant activity from the Investment Company Institute (ICI) shows withdrawal and account transfer activity was low in 2014.

Between January and September 2014, 8.1% of DC plan participants changed the asset allocation of their account balances. This level of reallocation activity was slightly lower than the reallocation activity observed during the comparable periods from 2009 through 2013, according to ICI.

Get more!  Sign up for PLANSPONSOR newsletters.

Reallocation of participants’ contributions also was lower than rates observed in earlier periods; 5.6% of DC plan participants changed the asset allocation of their contributions during the first three quarters of 2014, compared with 6.8% in the first three quarters of 2013, 6.5% in the first three quarters of 2012, 8.4% in the first three quarters of 2011, and 7.1% in the first three quarters of 2010.

DC plan participants’ withdrawal activity during the first three quarters of 2014 was in line with activity observed during the same time period in 2009 through 2013, according to ICI. Between January 2014 and September 2014, only 3.1% of DC plan participants took withdrawals from their participant-directed retirement plans, with 1.4% taking hardship withdrawals.

The recordkeeper survey data indicated that only a negligible share (2.7%) of DC plan participants stopped making contributions during the first three quarters of 2014. ICI notes it is possible that some of these participants stopped contributing because they had reached the annual contribution limit.

Loan activity remains elevated compared with six years ago; however, the data show that at the end of September 2014, 18% of DC plan participants had loans outstanding, compared with 18.2% at year-end 2013. At year-end 2008, 15.3% of DC plan participants had loans outstanding. 

The latest report from ICI updates results from its survey of a cross-section of recordkeeping firms representing a broad range of DC plans and covering more than 25 million employer-based DC retirement plan participant accounts as of September 2014. The report may be viewed here.

 

«