Large 401(k) plans are more likely to offer employer contributions, use automatic enrollment and have participant loans outstanding, according to new research by BrightScope and the Investment Company Institute.
In a study — The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2013 — BrightScope and ICI examined the Form 5500 filings of 34,000 401(k) plans from 2013 with more than 100 plan participants to determine their key features.
Eighteen percent of all 401(k) plans in the study showed evidence of all three activities. In plans with 1,000 participants or more, 35% had all three types of activities, compared to fewer than 15% of plans with 100 to 499 plan participants.
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The majority of large and small plans in the study offered employer contributions with 95% of plans with 5,000 participants or more offering them and three-quarters of 401(k) plans with fewer than 100 participants offering them in 2013, BrightScope/ICI found.
“Employer contributions represent a significant portion of contributions flowing into 401(k) plans. In 2013, $109 billion, or a third of total contributions into 401(k) plans, were employer contributions,” the report found. “Employer contributions have represented a relatively steady share of contributions over the past several years; in 2006, 31% of contributions were employer contributions.”
More than half of 401(k) plans in the BrightScope/ICI study with more than $250 million in plan assets said that they automatically enrolled their participants and nearly six in 10 plans with more than $1 billion in plan assets did the same, according to the report. That figure was much lower for plan with $1 million to $10 million in plan assets: Fewer than one in six plans offered automatic enrollment.
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BrightScope/ICI also found that 90% of large 401(k) plans — with more than $100 million in plan assets — had participant loans outstanding in 2013 compared with 61% of plans with $1 million to $10 million in plan assets. Out of the 54,000 401(k) plans studies with 100 participants or more, 72% had participant loans outstanding.
The study also looked at 401(k) plan investment menus and found that the average 401(k) plan in 2013 offered 27 investment options, of which 13 were equity funds, three were bond funds and seven were target-date funds.
“Nearly all plans offered at least one equity and bond fund, and nearly three-quarters of plans offered a suite of target-date funds. Funds include mutual funds, collective investment trusts, separate accounts, and other pooled investment products,” according to BrightScope/ICI.
Mutual funds were the most popular investment in the majority of 401(k) plans with these instruments holding about half of all 401(k) plan assets in 2013, but equity funds had the largest share of assets in 401(k) plans, according to the study. Collective investment trusts held 22% of assets; guaranteed investment contracts held 10%; separate accounts held 4%; and the remaining 16% was invested in individual stocks, bonds, brokerage and other investments, the study found.
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In 2013, nearly 45% of assets were held in equity funds, nearly 20% was held in balanced funds and about 8% was held in bond funds, the report stated.
BrightScope has tracked 401(k) plan costs since 2009. It found that plan fees have decreased since 2009.
“In 2013, the average total plan cost was 0.89% of assets, down from 1.02% in 2009. The average participant was in a lower-cost plan, with a total plan cost of 0.58% of assets in 2013 (down from 0.65% in 2009), while the average dollar was invested in a plan with a total plan cost of 0.42% in 2013 (down from 0.47% in 2009),” BrightScope found.
The full study is available
Paula Aven Gladych is a freelance writer based in Denver.
