PLANSPONSOR - November 2011

slight increase in the mega-plan segment, where the participa-
tion rate rose from 82% to 84%.

As a trend, automatic enrollment barely budged; overall, just a third of responding employers have this in place, ranging from just one in five among smaller employers (identical to last year’s results) to roughly half of employers in the mid, large, and mega market segments. Movement is still positive for the trend, but modest.

match. Only 11% overall do not, and only 5% to 7% do not in every market segment except micro (where 16% do not provide some kind of contribution). An organizational match is most common (about eight in 10 in the larger plans, about two-thirds in small plans, and a little more than half in the micro-plan segment). Profit-sharing contributions were found at more than a quarter of plans represented, though just 16.4% of mega plans had one.

When it comes to auto-enrolling, the vast majority of employers still choose to do so prospectively, with a mere 29.6% targeting existing employees with these initiatives. Other objectives included existing employees contributing below the auto-deferral rate, and a few choosing to pursue a “re-enroll” strategy by targeting existing employees in the plan, but not invested in the qualified default investment alternative (QDIA).

There was, however, a great deal of diversity in the level of the employer contribution. Roughly a third ( 31.7%) said it amounted to less then 50% on the first 6% of employee deferrals, just about as many ( 30.7%) did so at a level equal to 50% on the first 6%, and a little more than a quarter ( 27.3%) said those contributions amounted to between 51% and a full dollar-for-dollar on the first 6% of employee deferrals (the rest came in richer than those levels). Overall, match levels were roughly consistent with those found in last year’s survey.

As for those default investments, money market funds remained the option of choice for micro plans and, at one in five, pretty much at the same level as in last year’s survey. Indexed target-date funds were the option of choice for mega plans ( 31.5%), while actively managed target-date funds topped the list for small, mid-size, and large plans ( 33,1%, 41.5%, and 38.1%, respectively). Risk-based funds showed up in about 7% of the respondent plans, and balanced funds (the second-most popular default for micro-size program respondents) made it to double digits with small and mid-size programs as well. While 26.2% of mega-plan respondents opted for actively managed target-date funds as a default, 16.1% had selected custom target-date funds.

On the critical issue of saving to the level of that match, three-quarters (74%) of plan sponsor respondents, on median, said that “all or nearly all” (90% or more) of their participants were deferring at a rate sufficient to receive the full match, while two-thirds, on average, made that claim. Interestingly enough, things were both better—and worse—at the smallest employers. Among micro-size employers, 38% were in the “all or nearly all” category, compared with 22.2% at mega-size plans and about a quarter of the small programs, while 27% of those micro-size employers said that less than half were saving enough to get the full match, compared with one in 10 ( 11.1%) among mega-size employers.

Not surprisingly, in view of the safe harbor guidelines found in the Pension Protection Act of 2006, most plans were inclined to adopt 3% as a default deferral rate—but only a little more than half, even at the largest plans. A full 7.3% overall (and more than one in eight of the largest programs) used 6%, and just as many chose 5%. Roughly one in 10 picked 4%, while 12.8% chose 2% as the default contribution rate, and about one in 20 went with 1%. “Out” Takes

Much has been written about the surge in loans in the middle of a still-weak economy. The number of plans offering loans has remained relatively consistent (about three-quarters do), but—thanks to an uptick in micro plans—nearly 85% of respondents now offer hardship withdrawals, compared with just 72% a year ago. There has been a modest uptick in utilization; 16% of participants in plans with loans now have one outstanding, compared with 12% in last year’s survey (13% and 10%, respectively, at the median). Similarly, the pace of hardship withdrawals has picked up noticeably, though plan sponsors said 2%, on median, of their participants had taken a More plans provided for immediate participation this year ( 33.1% versus 28.3% a year ago), but only slightly more, drawing from those that allowed for it after six months (from 36.5% a year ago to 32.2% this year), while the number that provided for participation within three months ( 25.1%), and after four to six months ( 9.6%) remained roughly unchanged.

The pace of contribution continued to accelerate, albeit at a varied pace. Nearly half of mega programs had embraced the design feature (up from 32.5% a year ago), as had a full third of large employers (up from 25%), and a quarter of mid-size programs. The adoption pace at micro plans was modest ( 8.0%), but still nearly twice the pace evidenced in last year’s survey.