Defined Contributions Insights MagazineMay/June 2008
The Employer Role in Retirement — A PSCA Snapshot
Determining the employer’s role after a participant retires.
Many employers are taking a more active role in helping their employees accumulate significant amounts in their 401(k) plans. However, the employer’s role after a participant retires has yet to be determined. To establish a baseline of employer thinking on this subject, PSCA conducted a snapshot survey of the membership. 213 members responded. 5 percent actively encourage their retiring participants to leave their 401(k) balance in the plan. 11 percent actively encourage their retiring employees to withdraw their plan assets. 84 percent were ambivalent. On the question of whether or not the plan was assisting participants in the selection of an IRA provider, 35 percent said they were. 65 percent said they were not. The chart below reports the answers members gave to the question, “Which of the following education/ guidance/information does your company provide to retiring participants?”
PSCA has just begun considering this question. There was a breakout session on this topic at its April 17 Midwest Regional Conference. There will be a session on the topic at the 61st Annual National Conference in Nashville, Tennessee, September 16–19, 2008.
Plans Offering Index Funds — Analysis of 50th Annual Survey Data
House bill requires that index funds be made available to plan participants.
The 401(k) Fair Disclosure for Retirement Security Act of 2008, As Approved by the Committee on Education and Labor on April 16, 2008, HR 3185, contains a provision that requires a participant individual account plan to have an index fund as defined in the bill as a condition of 404 (c) protection. According to PSCA’s 50th Annual Survey of Profit Sharing and 401(k) Plans, of 937 participant-directed plans, 72 percent offered an Index fund of some type (though few would meet the legislation’s definition).
Because larger companies are more likely to have an index fund in their plans, this correlates to 88 percent of participants in these plans who are offered an Index fund. Of the plans that that offer an index fund, 18.8 percent of total assets are invested in some type of Index fund.
Percentage of Plans Offering Index Funds within All Participant-Directed Plans
All Participant- Plans that Offer Percent
Directed Plans Index Funds Relationship
Plans 937 675 72.0%
Participants 3,992,086 3,523,260 88.0%
Assets $355,223,560,926 $66,874,995,563 18.8%