Little surprise, things were going great in the retirement plan space prior to the worst global pandemic in 100 years.
The Plan Sponsor Council of America (PSCA) unveiled its 63rd Annual Survey Thursday, which reflected 2019 plan-year data, and found record contribution and participation rates for the third year in a row.
“More employees had account balances in, and contributed to, their plans than ever before, and employers contributed an average of 5.3% of gross annual pay to participants, the highest recorded to date,” PSCA reported.
Plan participants contributed an average of 7.6% percent of pay in 2019, combined with the 5.3% companies are pitching in gives an average savings rate of 12.9% in 2019.
“2020 has been a challenging year in so many ways and companies have faced unprecedented challenges,” Hattie Greenan, director of research for PSCA, said in a statement. “Though retirement plans have been impacted, the fact that they were in such good shape going into this year bodes well for a swift recovery once the economic impact of the pandemic begins to ebb.”
Key metrics
- Participation – More than 90% of eligible employees have an account balance, and most (87.3%) of those made contributions in 2019.
- Roth – Roth contributions are now permitted in three-fourths of plans, up from 69.1% in 2018.
- Target-Dates – Eighty percent of plans offered a target-date fund in their menu, up from 68.6% in 2018.
- Managed Accounts – Forty percent of plans now offer a professionally managed investment alternative to participants, up from 36.3% in 2018.
- Mobile Tech – Nearly 60 percent of plans now offer plan access via mobile technology, up from 47.5% in 2018.
Amidst all that positive movement, some key plan design aspects held steady. Availability of in-plan annuities remains at fewer than 10% of plans, as it has for the last several years. Similarly, while ESG/SRI investments have been a hot topic of late, fewer than three percent of plan sponsor respondents included that option on their plan investment menu.
“We concluded 2019 with passage of the SECURE Act, which had a number of provisions in it targeted to improve and enhance retirement savings security, including lifetime income options,” added Nevin Adams, Chief Content Officer and Head of Retirement Research at the American Retirement Association.
While the economic and physical impacts of COVID-19 may well weigh on retirement preparations, the results at year-end 2019 suggest that the retirement security prospects of Americans with access to a retirement plan at work were the best it has ever had been.
“As we emerge from the economic undertow of the pandemic, we’re optimistic about that solid foundation – and hope that more employers will be able and willing to support these vital programs,” Adams concluded.
THE FULL REPORT IS AVAILABLE FOR PURCHASE HERE.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
