Despite the onset of the COVID-19 pandemic, public sector defined contribution account balances and dollar contributions grew steadily from 2019 through 2021.
The average plan balance rose from $43,839 in 2019 to $61,886 at year-end 2021 while the median balance rose from $10,365 to $16,864
That’s according to a new report out today from the Public Retirement Research Lab (PRRL), a collaborative effort of the Employee Benefit Research Institute (EBRI) and the National Association of Government Defined Contribution Administrators (NAGDCA). The report offers a longitudinal analysis of 1.1 million public-sector defined contribution plan participants.
The growth was found to be widespread throughout all participants.
“The time period under study, 2019–2021, represents an interesting period of study of participants’ retirement saving behaviors given the COVID-19 pandemic and subsequent economic uncertainty. Despite the pandemic, DC account balances and contributions were found to have steadily increased from 2019 to 2021,” said Samita Thephasit, research associate, EBRI. She added that account balances and contributions were also found to be higher among participants in older age groups with more tenure.
Overall, the average plan balance rose from $43,839 in 2019 to $61,886 at year-end 2021 while the median balance rose from $10,365 to $16,864. The median year-over-year change in balances from 2019 to 2020 was $3,045 and the median change in balances from 2020 to 2021 was $1,941. Similarly, the average year-over-year change in balances from 2019 to 2020 was $11,323 and the average change in balance from 2020 to 2021 was $6,724.
Other key findings from the report, “A Longitudinal Analysis of Consistent Participants in the Public Retirement Research Lab Database, 2019-2021,” include:
• Dollar contributions increased among participants who continued saving. Among the participants who contributed each year, the average employee contribution increased from $2,405 in 2019 to $2,778 in 2020 and $3,012 in 2021. Median employee contributions increased from $1,222 in 2019 to $1,392 and $1,520 in 2020 and 2021, respectively.
• Participants tend to concentrate their accounts in equities. At year-end 2019, the average allocation to equity funds was approximately 67% of consistent participants’ assets. This includes allocations directly to equity funds and the equity portion of target-date funds or of non-target-date balanced funds. Younger participants tended to have higher concentrations in equities than older participants. Participants’ exposure to equities and the other asset classes remained relatively constant over the 2019-2021 timeframe.
“More than 86% of consistent plan participants had at least some exposure to equities in their retirement plans from 2019 to 2021, with younger participants having higher average total equity exposure than older participants,” said Matt Petersen, executive director, NAGDCA.
• Younger participants allocate a higher percentage of funds to TDFs. Petersen noted that older participants had higher allocations to equity funds, bond funds and stable-value funds while younger participants had a higher concentration of TDF allocations. In 2021, participants in their 20s allocated an average of 67% to target-date funds, while participants in their 60s had an average allocation of 29%. Additionally, the utilization rate of TDFs remained steady, with 36.6% of the consistent sample participants allocating their entire portfolio to them every year from 2019 to 2021.
“In 2019, 38.8% of the consistent sample participants allocated their entire portfolio to target date funds. In 2021, 94.3% of these participants were still fully allocated to TDFs,” Peterson added.
“As account balances continue to grow, as shown in this study, plan sponsors should consider how DC plans and defined benefit plans can better work together to improve workers’ retirement security,” Petersen said.
View the complete research report here.
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