Employers: How does your plan compare?

The good news is that the Participant Deferral Rate rose slightly year on year.

The average participation rate in 401(k) plans was 88% at the end of 2012, according to the 56th Annual Survey of Profit Sharing and 401(k) Plans by the Plan Sponsor Council of America (PSCA). The rate is defined as the average percentage of eligible employees who had a balance in the plan, as the average number of investment choices offered to participants remained at 19 across all employer plans.

The year before the rate was 86%. An average of nearly 81% of eligible employees made contributions to the plan in 2012. The average participant pre-tax deferral rate was 6.8%, compared to 6.4% the year before.  Here are some highlights:

Fast eligibility continues.  About 62% of companies permit employees to contribute to the plan immediately upon hire. Almost half (46%) grant immediate eligibility to receive the company match, while 29% require one year of service.

Auto-enrollment remains popular.Over 47% of plans had an automatic enrollment feature. The most common default deferral rate was 3% of pay (52% of plans). More than 35% of plans reported a default deferral rate greater than 3%. Target retirement date funds remained the most common default investment option (73% of plans).  About 58% of plans with automatic enrollment also provide for automatic increases in contribution rates over time.

Roth usage rises. 
About 54% of plans permitted Roth 401(k) contributions, up from 49% the previous year. Of those eligible to make Roth contributions, 20% did so. Based on ADP test results, the average Roth deferral rate of lower paid participants was 4.0%. For higher-paid participants, the average was 4.9%.
 Other survey results:

  • More than 89% of plans had an investment policy statement.
    Monitoring of investments occurred most often on a quarterly basis (67% of
  • Immediate vesting of matching contributions was reported by 41%
    of plans.
  • More than 18% of plans offered company stock as an investment
  • Almost 88% of plans allowed hardship withdrawals, and about 2%
    of participants had such a distribution in 2012.
  • Loans were permitted in 88% of plans. More than half of these
    plans (51%) allow only one loan at a time.
  • Rollovers were accepted in nearly 98% of plans. Nearly
    two-thirds of plans required employees to be eligible to make elective
    deferrals before they could roll over assets into the plan.
  • Catch-up contributions were permitted in nearly 98% of plans.
    About 24% of those eligible made additional contributions.

The survey reflects the 2012 experience of 10.3 million participants in 686 plans that had a total of more than $769 billion in plan assets. The survey may be purchased from the PSCA at http://www.psca.org.

FM International Services (NY), Ltd. provides a wide range of retirement services featuring customized benefit plans, flexible investment options, and centralized pension administration. Through FMi’s countless services, businesses of all sizes create unique domestic and international retirement plans for two employees or two thousand – with a single provider handling
conversion, setup, and administration.


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