Minority of 401(k) Plan Sponsors Measure Retirement Readiness as Benchmark of Plan Success

Seventy-seven percent of 401(k) and profit sharing plan sponsors evaluate whether their retirement plans are successful, according to the Plan Sponsor Council of America (PSCA)’s 61st Annual Survey of Profit Sharing and 401(k) Plans.

The percentage among the largest plans (5,000 or more participants) is 84.8%.

The survey finds the most used benchmarks for retirement plan success remain participation and deferral rates (90.8% and 75.8%, respectively), with only 31.4% using participant income replacement ratios as a success measure. Even among large plans, participation and deferral rates far outweigh retirement readiness as a benchmark for plan success. For plans with 1,000 to 4,999 participants, 92.1% use participation rate as a benchmark of plan success, 75% use deferral rates and 40.8% use income replacement ratios. For plans with greater than 5,000 employees, the percentages are 93.6%, 85.9% and 47.4%, respectively.

More than half of all plans (57.5%) reported they use average account balances as a benchmark for plan success.

According to the survey, plan sponsors monitor a number of participant behaviors. Nearly 71% monitor participant contribution levels, followed by 51.8% that monitor loan usage, 48% that monitor investment allocations and 44.5% that monitor hardship withdrawals.

Around 45% of plan sponsors reported that they have taken action based on what they learned from monitoring participant behaviors; however, specific actions taken were not reported.

PSCA’s 61st Annual Survey reflects the 2017 plan-year experience of 605 DC plan sponsors. The full printed survey is available for pre-order (electronic copies are available now).