Here are some facts about 401(k)s:
- The average number of investment options has risen from 4.0 in 1991 to 8.2 in 1997.
- The most popular type of investment option is now equity growth funds, which 82 percent of all plan sponsors provide. That’s followed by balanced (78 percent), international equity (67 percent) and bond (67 percent). The least popular choice is company stock (23 percent).
- In 1990, 47 percent of all 401(k) assets were placed in guaranteed investment contracts (GIC). In 1997, the figure had dropped to 18 percent. During the same period, investments in equities grew from 11 percent to 44 percent.
- Most companies now provide at least a partial match for 401(k)s. Although only 1 percent of all companies provide more than a 100 percent match, 22 percent provide a 100 percent match; 8 percent offer a match of 51 percent to 99 percent; 52 percent feature a 50 percent match; 5 percent provide a 26 percent to 49 percent match; and 12 percent offer less than a 25 percent match.
- Employee communication is seen as a far less expensive way to build participation than increasing the matching contribution. Sixty-two percent of respondents say communication has resulted in higher participation; 67 percent say it has helped increase contributions; and 74 percent believe it has influenced employee investment allocations.
- Sixty percent of companies net the cost of investment management from investment returns; 34 percent absorb the cost; and 6 percent deduct it from employee accounts. The employer pays record-keeping expenses in 68 percent of plans; 23 percent deduct the cost from investment returns; and 9 percent take it from workers’ accounts.
- Fifty-one percent of 401(k) (kiosk) providers also offer a defined benefit pension plan covering all or most employees.
SOURCE: William M. Mercer, “Survey on Employee Savings Plans 1997”
Workforce, April 1998, Vol. 77, No. 4, p. 72.