collage of people looking at phones and large compass behind with big word 401k (Photo: Shutterstock)

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A new research report from T. Rowe Price Retirement PlanServices Inc. on 401(k) participant behavior and plan designshowed employers last year had increased their match formulas and overall plan participationamong employees was greater than 79%.

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T. Rowe Price's annual Reference Point report, based on data from2019, said rising plan participation could be driven by employers'increased match decisions, personalized experiences, wage growthand plan design.

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More than 61% of T. Rowe Price plans automatically enrollparticipants, the Reference Point report said. Of those, more thanhalf enroll at a 6% default deferral. Employers, according to thereport, bumped up match formulas from 3% to a 4% to 5% range "in anapparent move to incentivize more employees to save."

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T. Rowe Price acknowledged that the latest report, released lastweek, does not capture 401(k) participant behavior and plan designtied to the COVID-19 crisis that has profoundly affected thecountry over the last several months.

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"We recognize the financial strain of the coronavirus pandemiccould have repercussions long after 2020," Kevin Collins, head ofT. Rowe Price Retirement Plan Services, said in a statement. "Weknow that life evolves and priorities change, and we continue tosee—now more than ever—the importance and significant impact plandesign and financial wellness programs have on keeping participantson track with their financial priorities."

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A recent MagnifyMoney survey said 30% of respondents had reporteddipping into retirement funds amid the virus crisis, whichcurtailed business activity nationwide and put millions ofemployees out of work. "The fact that the majority of respondentswere withdrawing funds to cover essential expenses highlights adisheartening reality," according to the MagnifyMoney report.

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T. Rowe Price's Reference Point report found that planparticipants in 2019 "took larger loan and hardship withdrawalamounts, which could threaten their retirement savings."

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The adoption of auto-increase reached a new five-year high ofnearly 80%, according to the Reference Point report. "Plan sponsorsfavored increases of one percentage point, with one in three plansat T. Rowe Price choosing this as the default," the report said.Opt-out approaches increased in 2019, the report said, while opt-infell for the fourth consecutive year.

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The latest Reference Point report said there was a slight uptickin the percentage—more than 60%—of T. Rowe Price retirement plansoffering auto-enrollment.

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On the contributions front, more than 77% of plans offered aRoth option, an increase over the previous year, T. Rowe Price'sreport said. Participant use of Roth contributions increased to8.5% in 2019 from 7.6% in 2018. More than 18% of plans—an increaseof three percentage points over 2018—saw employers matching 100% upto 3%, plus 50% up to 2%, T. Rowe Price said.

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Average account balances ticked up, according to the ReferencePoint report. "Higher combined employee and employer contributionscontributed to the increase in average account balance," the reportsaid. For individuals between the ages of 40 and 49, the averagebalance was $102,183. For 50 to 59, the average balance was$169,214; 60 to 64: $187,960; and 65 to 69: $184,817.

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Across all age groups, T. Rowe Price said investment intarget-date investments increased last year. The biggest gains werein individuals less than 20, and those between 30 and 39.

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"In 2019, target date investments held the highest percentage oftotal retirement plan assets under administration—42.9%. Only stockinvestments came close among the other asset types, at 33.8%," theReference Point report said.

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Mike Scarcella is a senior editor atLaw.com in Washington. Contact him at [email protected] and onTwitter @MikeScarcella.

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Mike Scarcella

Mike Scarcella is a senior editor in Washington on ALM Media's regulatory desk. Contact him at [email protected]. On Twitter: @MikeScarcella. Mike works on a slate of newsletters: Supreme Court Brief | Higher Law | Compliance Hot Spots | Labor of Law.