Just how important is the small plan defined contribution market to thecountry’s overall retirement readiness prospects?

|

New datafrom Judy Diamond Associates, a business unit of ALM Media, theparent company of BenefitsPro, suggests the smallest plans may bethe best functioning for sponsors and participants.

|

A provider of lead-generation and market intelligence tools forthe financial services and insurance industries, JDA examinednearly 480,000 401(k) plans for plan year2014, breaking performance down by plan size across 22 industries.The findings represent data from about 52 million participants withmore than $4 trillion in DC assets.

|

Several factors were considered in measuring performance by plansize and industry, including participation rates, levels ofemployer and employee contributions, average account balances, andannual rates of returns. From that data, JDA assigns a plan score,based on a 100-point system.

|

After aggregating the results for all industries, thesmallest plans, with one to 10participants, posted a score of 62, the highest among eight levelsof plan size.

|

More than 178,000 plans fall into that size group, more than allother segments. The average account balance was $75,735, andparticipation rates averaged 89 percent, both tops by plansize.

|

Average employee and employer contributions--$4,850 and $1,979respectively—were also more than all other size segments.

|

By comparison, the largest plans, with 5,000 or moreparticipants, which accounted for 1,793 total plans, posted anaverage score of 57, the third highest among the eightsegments.

|

The average account balance for the largest plans was $54,513,and the average participation rate was 73 percent. Employee andemployer contributions averaged $3,067 and $1,424,respectively.

|

The rate of return was mostly consistent among all plan sizes.“This suggests that what separates a great 401(k) plan from anaverage 401(k) plan is not which mutual funds are made available,but rather how the employer chooses to incentivize its employee tocontribute to their own retirement,” said the report, which wasauthored by Eric Ryles, managing director at JDA.

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.