A new report from the NAGDCA and the Employee Benefit Research Institute (EBRI) spotlights public sector defined contribution (DC) plans, in an effort to help plan sponsors identify plans’ strengths, weaknesses, and opportunities for improvement.
The Public Retirement Research Lab (PRRL), compiled with data from year-end 2021 and from 226 plans with total assets of $165 billion, reports the median account balance per participant is at $80,046, with participants ages 65 and older holding a median balance of $136,058 compared to $35,257 for participants between the ages of 35 and 44.
Over 70% of plans fielded were single employer, while 62% were 457(b) plans and three in tend were 401(a) DC plans.
Public sector DC participants tended to contribute an annual average of $3,665 to their retirement accounts. Those ages 25 to 34 contributed an annual amount of $2,318 and participants between 55 to 64 years old added an annual figure of $4,501.
The PRRL also broke down contributions by gender, finding that male workers contributed $3,835 to their accounts on an annual basis, compared to $3,182 for women.
Participants tended to invest in off-the-shelf target-date funds (TDFs) (19%), large-cap domestic equity funds (15%), and stable value and fixed accounts (11%), and on average, were offered 29 different investment options to participate in.
According to the NAGDCA, the Public Retirement Research Lab (PRRL) is the repository for individual participant-level DC data provided by plan sponsors via their record keepers. This participant-level DC data is aggregated by EBRI into plan-level data, which is compiled, tabulated, and analyzed by Industry Insights Inc. to create research reports and the PRRL Portal for sponsor benchmarking purposes.
The data was created to address the “significant lack of attention” and understanding of public sector DC plans and to help public sector employees adequately save for retirement, said NAGDCA Executive Director Matt Petersen.
Past public sector research has often focused on defined benefit (DB) plans. As the retirement industry shifts out of pension-like plans, more notice is being turned to DC strategies, despite the fact that data on these plans is still limited.
“Public-sector retirement research, often focused on DB plans as the sole source of retirement income for state and local governments, has largely excluded public sector DC plans,” said Petersen. “This inadequacy is the result of both the remaining relatively greater percentage of public sector DB plans [than in the private sector] and the difficulty of aggregating public sector DC plan data due to the extraordinary variety of public DC plan structures.”
Peterson says he hopes the data will push public sector employers to offer financial wellness tools and education to participants. While benefits like automatic enrollment options are almost a prerequisite in private sector workplace plans today, only 5% of voluntary plans in the public sector utilize the auto-feature.
“As the results of this report illuminate, there are important differences between private and public sector DC plans. Key among these is the significantly low rate of use of automatic enrollment by voluntary plans. Additionally, these results spotlight the need for public sector sponsors to address the growing importance of robust and educated participation in public sector DC plans as a means of offsetting DB plans’ ever-shrinking salary-replacement levels,” he concluded.
As of year-end 2021, the PRRL Database contains data for more than 2.9 million state, county, city, and subdivision employees, and $165 billion in assets in 226 457(b), 401(a), 403(b), 401(k), and other DC plans, and is managed by 123 plan sponsors.
More information on the PPRL can be found here.
SEE ALSO:
- NAGDCA Creates ‘SECURE 2.0 Summary’ for Governmental DC Plans
- 3 Funds Favored by Public Sector DC Plan Participants
- New Public Sector DC Plan Database Bears First Fruit
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.