The Plan Sponsor Council of America’s Annual Survey shows that 2019 was a banner year for retirement plans—and doubtless a valuable lifeline for many during the COVID-19 pandemic.
For the third year in a row, the survey—PSCA’s 63rd Annual—found record contribution and participation rates. Employers contributed an average of 5.3% of gross annual pay to participants, the highest recorded to date—and plan participants contributed an average of 7.6% of pay in 2019—combining for an average savings rate of 12.9% in 2019.
Additionally, more employees had account balances in, and contributed to, their plans than ever before. More than 90% of eligible employees have an account balance, and most (87.3%) of those made contributions in 2019.
More plans are automatically deferring participants at higher rates (above the traditional 3%), and nearly 1 in 10 target automatic deferral increases at “under-contributing” participants.
Perhaps fueling those strong responses, 70% of plans use an investment advisor for the plan; one-third of plans offer investment advice to participants; and a quarter of participants with that access take advantage.
Plan Design Trends
Roth contributions are now permitted in three-fourths of plans, up from 69.1% in 2018.
Eighty percent of plans offered a target-date fund in their menu, up from 68.6% in 2018.
Forty percent of plans now offer a professionally managed investment alternative to participants, up from 36.3% in 2018.
Nearly 60% of plans now offer plan access via mobile technology, up from 47.5% in 2018.
Amid all that positive movement, some key plan design aspects held steady. Availability of in-plan annuities remains at fewer than 10% of plans, as it has for the last several years. On the other hand, more than 40% of plans already provide lifetime income projections, ahead of the implementation of SECURE Act’s provisions.
While ESG/SRI investments have been a hot topic of late, fewer than 3% of plan sponsor respondents included that option on their plan investment menu, a slight dip from 2018. Only about 0.1% of plan assets were invested in those options. However, these were more common among the largest plans (those with more than 5,000 participants) and the smallest (fewer than 50 participants), where 4.2% and 4.4%, respectively, offered that option.
“2020 has been a challenging year in so many ways and companies have faced unprecedented challenges,” said Hattie Greenan, director of research for PSCA. “Though retirement plans have been impacted, the fact that they were in such good shape going into this year bodes well for a swift recovery once the economic impact of the pandemic begins to ebb.”
A recent PSCA snapshot survey found that despite the turbulent economic conditions thus far in 2020 and speculation that companies would stop making contributions to retirement plans as a result, more than 90% still plan to make their retirement plan contributions this year.
PSCA’s 63rd Annual Survey of 401(k) and Profit Sharing Plans reports on the 2019 plan-year experience of 602 plans. The full report, including 185 valuable plan benchmarking-suitable data tables, is available for purchase at: https://www.psca.org/research/401k/63rdAR.