Benefits April 1, 2013

Survey Finds Governmental 457 Plan Growth

April 1, 2013 (PLANSPONSOR.com) – Assets in governmental section 457 retirement plans increased between 2011 and 2012, the National Association of Government Defined Contribution Administrators (NAGDCA) finds.
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Total assets of 457 plans were more than $103.3 billion for 2012, according to the “2013 NAGDCA Defined Contribution Plan Survey,” while the total for 2011 was $88 billion. The survey also found governmental 401(a) plan asset totals rose from $16 billion in 2011 to $21 billion in 2012, and governmental 401(k) plan asset totals decreased from $21 billion in 2011 to $18 billion in 2012. Three responding governmental 403(b) plans had assets totaling more than $4.6 billion.

While 6.5 million government employees were eligible to participate in defined contributions (DC) plans, only 1.7 million of them made deferrals during 2012, the same as in 2011. The average participant account balance was $41,000; the average annual deferral amount was $4,219; total employee elective contributions totaled $5 billion; and total employee mandatory contributions totaled $316 million. 

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Most of the plans surveyed (60%) said they did not offer an employer matching contribution. The remaining 40% said they provided a match based on a percentage of pay per payroll period.

With regards to participation, 73% of plans said participation was elective and 92% said they did not use an automatic enrollment feature. For those that did use automatic enrollment, 55% of employees opted not to participate. Seventy-eight percent of respondents indicated their employees are also covered by a defined benefit (DB) plan.

The majority of plans (81%) disclose fee information through a website; 82% offer target-date funds; 55% offer balanced funds; 24% offer target-risk funds; and 17% offer funds-of- funds.

The survey covered a total of 136 government defined contribution plans including 401(a) plans (29), 401(k) plans (12), 403(b) plans (6) and 457 plans (89).

A summary of the survey results can be downloaded here.

Benefits April 1, 2013

Many Lack Understanding of IRAs

April 1, 2013 (PLANSPONSOR.com) - Nearly half of respondents to a TIAA-CREF survey said they do not understand individual retirement accounts (IRAs).
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Most of those surveyed (80%) said they are not contributing to an IRA, up 4% from last year. Close to half also lack basic understanding of what IRAs are and how they are used. This low awareness underscores the importance of financial education and advice, the company said.   

Among Gen X respondents (ages 35 to 44), 67% said they would consider opening an IRA. However, of those who are disregarding IRAs, nearly half said the reason is they do not know enough about them.   

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The survey found nearly two-thirds of respondents are unaware of the maximum contribution amounts allowed for IRAs. More than half of those surveyed who own an IRA reported they are investing less than the annual limit.

“Many individuals are still missing out on the long-term savings benefits of IRAs, simply because they don’t understand what they are and how they work,” said Dan Keady, director of financial planning for TIAA-CREF. “By allowing savings to grow on a tax-deferred basis, an IRA can help give current retirement savings a boost no matter what stage of life you’re in.”   

Fifty-seven percent of survey respondents who did not have an IRA reported they would consider one, including three-quarters of Gen X respondents, two-thirds of Gen Y (ages 18 to 34) and half of late Baby Boomers (ages 45 to 54).   

The survey also found men are more likely to contribute to an IRA than women, and men who have an IRA are also more likely to contribute up to the maximum amount.   

The 2013 TIAA-CREF IRA survey polled 1,008 adults age 18 years and older by phone between February 21 and February 24.    

—Jill Cornfield 

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