#1: 401k Churn Dominated by Small Plans

Over the 10-year period between 2011 and 2020, the Morningstar report more than 420,000 new DC plans were created and more than 380,000 (or about 38,000 per year) were terminated—mostly due to the employer going out of business. Almost all this churn was among plans with fewer than 100 participants, which accounted for 93% of plan terminations and 97% of newly created plans.

The total number of private-sector DC plans has been mostly stable, starting at about 628,000 in 2011 and steadily adding around 4,056 net new plans a year through 2020. The number of employers offering DC plans follows a nearly identical trajectory, with slightly fewer employers than plans, as some employers maintain multiple retirement plans.

The system also added around 1.8 million new DC participants each year, rising from 64.5 million participants in 2011 to 82.7 million participants in 2020.

While small plans account for almost all the churn, a relatively small number of large and mega plans—2,115—actually cover about half of those 82.7 million 401k participants in the U.S.

Plans with more than $500 million in assets—which Morningstar terms mega plans—have become more important to the retirement system over time. In 2011, these mega plans covered just 34% of participants, but by 2019, they had added almost 13.5 million more people and covered 43% of plan participants. Meanwhile, small and medium plans with $100 million or less in assets grew only modestly and covered a slightly smaller percentage of participants.

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