A Look Inside the Average 401(K) Plan: How Your Plan Compares
Monday, August 27, 2018
Posted by: Alyce Ryan
A message from Printers 401k®, an AICC Money Saving Program
As an employer, you face a challenge: attracting and retaining the right talent necessary to drive your business forward. At the same time, you likely feel a responsibility to help your employees reach retirement financially prepared. Your 401(k) plan can help manage both of these goals.
Keeping an eye on the latest trends and tactics in the 401(k) arena is one way you can keep your plan competitive. Here is a highlight of defined contribution plan design and activities across a wide variety of industries and company sizes, with data drawn from the PLANSPONSOR Defined Contribution Survey, 2017.
How many employees are contributing?
- In 2017, 79.3% of participants made contributions to their plans, up from 78.5% in the prior year. If your plan participation rate is less than overall or similar industry benchmarks, then review your plan design options and develop a strategy to increase plan participation. If your plan exceeds benchmarks, consider what features might drive even higher participation.
- 74% of organizations offer a matching contribution to participant accounts – with an Average contribution/deferral rates among active participants were 7%. Plans that offer an employer contribution are more attractive to both prospective and existing employees, which help recruiting and retention efforts. Matching Benchmarks: Based on first 6% of salary contributed:
- More than 100% Match: 7.9%
- 100% Match : 12.1%
- 51-99% Match : 33.8%
- 50% Match: 22.1%
- LESS than 50% Match: 17.5%
- 41% of plans now automatically enroll eligible employees. Automatic enrollment may be the most direct way to increase plan participation It also may help extend participation among more junior employees that might otherwise fail to enroll.
Why is plan participation important? Each year, 401(k) plans must pass a series of compliance tests to ensure that the company owners and key personnel are not benefitting disproportionately compared to lower paid employees. To pass these tests, plan metrics must fall within certain mathematical limits.
If you happen to receive failing results, you may need to act quickly to take corrective action to maintain the tax qualified status of your plan. These actions may include making taxable distributions to highly compensated employees (HCEs) or making additional employer contributions for other employees. See IT’S THAT TIME OF YEAR AGAIN: YEAR-END TESTING and 4 SIMPLE WAYS TO INCREASE 401K PARTICIPANT SAVINGS.
Just where is the money going?
- Plans offered an average of 22.8 investment options to participants with participants holding an average of 5.7 investment options within their plan. This number has remained relatively steady over the past 3 years.
- 92% of plans offered Mutual Funds and 71% of plans offered domestic equity index options.
See CHOOSING INVESTMENTS IN YOUR 401(K) for five guidelines to use when selecting funds for your plan.
Do you know what participants are actually paying in fees?
- 82% of plans annually review administrative cost/fees
- 63% calculated the actual fees your plan paid to their advisor
- 39% of companies have between 76-150 bps as the average asset-weighted expense ratio of all investment options in your plan.
- The average plan is wasting 25 basis points of participant’s money per year and some are wasting in excess of 1%. See THE AVERAGE 401K PLAN IS WASTING MONEY - IS YOURS?
As a plan fiduciary, you have a responsibility to ensure that the services provided to the plan are necessary and that the cost of those services is reasonable. To fulfill that important duty, make sure you understand the types of fees charged for your plan. See our article on RAISE YOUR RETIREMENT PLAN FEE IQ to further your knowledge.
- 37% of plans state their plan advisor is a fiduciary to their plan
Selecting an investment professional to help with your retirement plan is an important fiduciary matter—that’s why it’s crucial to understand the types of professionals available and how to choose the best one for your plan. See our article FOR HIRE: WHICH INVESTMENT PROFESSIONAL IS RIGHT FOR MY PLAN?
- 28% of plans did NOT have an investment committee
No one likes to go it alone, especially when “it” is the oversight of an employer sponsored retirement plan. The fiduciary rules, regulations, and the responsibilities to your employees, can be enormous burdens. You want to be in compliance and you want to provide a plan that meets the goals and objectives you set forth so your employees can adequately prepare for the future. See PLAN COMMITTEE GUIDELINES: 5 THINGS YOU NEED TO KNOW! for guidelines every plan committee member should know about his or her roles and responsibilities
Keep in mind ERISA’S original intent for retirement plans was for plans be ran by experts. Delegating administration and investment responsibility to outside experts, insulates a Plan Sponsor from both liability and responsibility. The delegation of administrative and investment fiduciary duties to fiduciaries that accept them in writing can offer REAL VALUE and peace of mind for Plan Sponsors. See GET IT OFF MY PLATE! HOW TO DELEGATE FIDUCIARY RESPONSIBILITY to help you understand where your plan currently falls on the fiduciary spectrum.
For your complimentary Plan Evaluation Worksheet which also includes the averages for Advertising, Marketing, and Printing Industry plans click below.
Plan Evaluation Worksheet
Note from the editor: The Printers 401k® Success by Design Program is a collaboration of 401(k) specialists who assume specific fiduciary duties for your plan. The solution is designed to fulfill your fiduciary obligations, allowing you to continue serving as the plan sponsor without the liability and responsibility.
Companies that have participated in the Printers401k® Program have been able to:
- Reduced Risk and Work
- Lowered Liability and Plan Costs
- Improved Plan Operations and Investments
Printers 401K is one of AICC's Money Saving Programs
Contact Joe Trybula CFP®, CPFA® today at 800.307.0376 or firstname.lastname@example.org to learn more about the Printers401k® Program, or request a free Plan Analysis Report which provides you with a snapshot of your plan investments, costs and plan operations compared to other plans in the industry. This analysis can reveal strengths and areas of concern along with solutions to improve your retirement plan.