Data and Research July 2, 2018

Plan Designs, Market Rates Lead to Improved DC Plan Metrics in 2017

“We continue to see the significant impact plan design and financial wellness programs have on participant behavior, as evidenced by the increase in both participation and deferral rates and decrease in loan usage,” says Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services.

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Participants’ average deferral rate in their defined contribution (DC) plans reached 8.3%, the highest in 10 years, according to a new report from T. Rowe Price, “Reference Point.”

Additionally, the number of plans with an initial 6% deferral rate for automatic enrollment (32.4%) surpassed those with 3% as the initial rate (31.9%).

Plans with automatic enrollment had a participation rate 42 percentage points higher than those without (87% versus 45%). Because of the strong markets in 2017, balances increased by an average of $9,583 last year, compared to $2,502 in 2016.

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Loan usage ticked down to 23.4%, and the percentage of people with multiple loans also decreased, to 15.6%, four percentage points lower than in 2013. However, among those 50 and older, the percentage of people with loans increased 2.2%. Loan usage is highest among older Gen Xers and younger Baby Boomers.

Sixty-seven percent of plans offered a Roth option in 2017, up from 60.3% in 2016.  Nearly every age group saw increases in the percentage of participants making Roth contributions, with the largest increases among people between the ages of 20 and 40.

The percentage of people making catch-up contributions reached 12.2%, a 10-year high. Plan sponsor adoption of target-date funds (TDFs) also reached a 10-year high, rising to 94% of plans, and for the first time, TDF assets surpassed assets in all other types of investments.

“We continue to see the significant impact plan design and financial wellness programs have on participant behavior, as evidenced by the increase in both participation and deferral rates and decrease in loan usage,” says Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services. “We’re pleased that plan sponsors have continued to evolve and refine their plans, encouraging positive behaviors with their participants and aligning plan design with their overall retirement benefits philosophy.”

T. Rowe Price’s full “Reference Point” report can be downloaded here.

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