When it comes to 401k saving and investing, things are looking up—literally. Surging confidence in the stock market (sans last week’s hiccup) along with, you guessed it, automation surely have something to do with it.
As of 2016, nearly 89 percent of eligible employees had a balance in their employer-sponsored defined contribution plan and just under 85 percent actively contributed to it that year, according to PSCA.
The report shows 60 percent of plan sponsors are utilizing automatic enrollment. Of these plans, 75 percent incorporate auto-escalation.
Interestingly, the need for fiduciary advisors is also growing, with 70 percent of plans employing some type of service.
Of those that use an investment advisor, 20 percent use a 3(38) advisor (one who has the discretion to make fund decisions) and 36 percent use a 3(21) advisor (one who provides advice to the employer, but the employer makes the fund decisions).
PSCA goes on to say, “More than one-third of plan sponsor respondents offer investment advice to participants,” whether it be through “a registered investment advisor (30.8 percent), a certified financial planner (28.8 percent) or a third-party web-based provider (20.2 percent).”
The majority of plan expenses are paid by the company, with the exception of recordkeeping and investment consultant fees, according to the organization. Forty-three percent of plans are charged a basis points fee for recordkeeping and administration fees, and 34.4 percent of plans pay a flat rate per participant. More than half of companies conduct a formal review of fees annually, and 30.3 percent review them more frequently.
Other upward trends to note:
- Plan sponsor contributions swelled to an average of 4.8 percent.
- The availability of Roth 401ks doubled in the last 10 years to a little over 63 percent.
- The number of target-date funds offered rose to around 75 percent of plans, and on average, 22.2 percent of participants’ assets are now being allocated here.
However, one number appears to be relatively stagnant. Average salary deferral rates are holding fast around 6.8 percent, with most default deferral rates having been set around 3 percent of pay.