Buoyed perhaps by improving economic conditions, plan participants saved more and plan sponsors strengthened their retirement plans as the bull market surged.
According to the 60th annual survey of profit sharing and 401(k) plans by the Chicago-based Plan Sponsor Council of America (PSCA), 84.9 percent of plan participants made contributions in 2016. Five years ago, in 2011, 76.9 percent of participants in the surveyed plans were contributing to their accounts.
On average, 88.7 percent of eligible employees had a balance in their plan during 2016.
The average salary deferral was 6.8 percent in 2016, up from 6.4 percent in 2011. Company contributions increased to an average of 4.8 percent of participants’ pay in 2016.
Most plans, 70 percent, retain an independent advisor to assist with the sponsor’s fiduciary responsibility. One in five plans using an advisor use a 3(38) advisor, which retains discretion to make fund decisions within the plan, while 36 percent said they use a 3(21) advisor, who provides advice to the plan sponsor, who then makes the fund decisions.
More than one-third of plan sponsors offer investment advice to participants in some form. Of these, 30.8 percent offer advice using an RIA, 28.8 percent offer advice using a CFP and 20.2 percent offer advice using a third-party web-based provider.
Three-fifths of the plans in the survey use automatic enrollment, and of those, 75 percent use automatic escalation, where deferral rates automatically increase over time.
More plan participants can now contribute to Roth accounts within their retirement plans, according to the survey, with 63.1 percent of plans now offering a Roth option. Roth availability within retirement plans has doubled in the last decade, according to the PSCA.
Plans offered an average of 19 funds, a number that has remained steady since 2011, according to the PSCA. The most commonly offered funds, indexed domestic equity funds, appeared in 87.3 percent of the plans in the survey. By comparison, 85.3 percent of plans offered actively managed domestic equity funds.
Actively managed domestic equity funds contained the most retirement plan assets, accounting for 22.9 percent of plan assets on average.