Jan. November 2001 Feb. EBRI Issue Brief (ISSN 0887-137X) is published monthly at $300 per year or is included as part of a membership subscription by the Employee Benefit Research Institute, 2121 K Street, NW, Suite 600, Washington, DC 20037-1896. Periodicals postage EBRI EBRI Table 5 Mar. Chart 10 Chart 4 rate paid in Washington, DC. POSTMASTER: Send address changes to: Chart 12 EBRI Issue Brief, 2121 K Street, NW, Suite 600, Table 11 Table 7 Ch ChTable 2 art 19 art 3 Ch Table 6 Table 4 Table 9 art 8 Chart 15 Table 1 Chart 6 Chart 22 Chart 13 Chart 16 This document is available electronically in pdf format. To order online, visit b a Sarah Holden is senior economist, Research Department, at the Investment Company Institute (ICI), and Jack EMPLOYEE Average Asset Allocation by Plan Size and Investment Options, 2000 Washington, DC 20037-1896. Copyright 2001 by Employee Benefit Research Institute. All rights reserved, No. 239. Account Balances Over $100,000 by A Particip ge and ant Account B Tenure, 2000 alances, 1996–2000 Ratio of Account B Average Account Balances Among 401(k) Participants alance to Salary for Participants in Their 20s 401(k) Plan Asset Allocation, Average Asset Allocation for Participants Without Equity Fund Balances by Age and Tenure, 2000 EBRI/ICI Database: 401(k) Plan Characteristics by Plan Assets, 2000 Asset Allocation Distribution of Participant Account Balances Average Asset Allocation by Age and Investment Options, 2000 Impact of Company Stock on Asset Allocation by Age, 2000 Percentage of Eligible P Aver Aver age Account B age Asset Alloca articip alants W ance tion, 1996–2000 by A ith Loans ge and Tenure, 2000 by Plan Size, 2000 Percentage of Eligible P Age Composition of Selected Account B articip EBRI/ICI Database: 401(k) Plan Characteristics Loan B ants W alances as a Percent ith Loans age of Account B alance Categories, alances Ratio of Account Balance to Salary for Participants in Percent Their 60s age of Eligible P by Tenure, 2000 articipants EMPLOYEE VanDerhei, Temple University, is research director of the EBRI Fellows Program. Special thanks to Luis Alonso www.ebri.org/publications or call EBRI Publications at (202) 775-9132. (percentage of account balances) (percentage of participants with account balances over $100,000) Apr. BENEFIT Present in Both 1999 and 2000, by Age Group by Tenure, 2000 to Equity Funds by Age, Tenure, and Salary, 2000 (percentage of account balances) (percentage of account balances) (percentage of account balances) by Number of Plan Participants, 2000 (percentage of total assets) by Age, 2000for Participants W 2000 ith Loans by Salary W , 2000 ith Loans by Average Tenure, 2000 $200,000 25% at EBRI, who managed the database, and to Janet Thompson-Conley at ICI, who prepared the graphics. This Total Total Total Average Account 400% (percentage of participants) RESEARCH 50% 60% 60% $55,502 BENEFIT The Employee Benefit Research Institute (EBRI) was founded in 1978. Its mission is Guaranteed 25% Average Account Balance $60,000 21% Total Plan Assets 20s PlansGuaranteed Participants Other Assets Balance 21% 100% 4% 7% 30% Guaranteed Guaranteed Number of Plan 20% Total Total Total Average Account May 26% 26% 53% 19% $49,024 document is being published simultaneously by the Investment Company Institute as ICI Perspective. Any views INSTITUTE ho we are Plan Size by ® 0–2 Years Equity Balanced Bond 13% Money Investment Company 51% 20s to contribute to, to encourage, and to enhance the development of sound employee benefit 16% Change 19% 19% W 19% $47,004 Balanced Bond Money Equity Investment Balanced Company BondStable Money Investment Company 50% Participants Plans Equity Zero Participants Balanced < 20% 20%–80% Bond Assets > 80% MoneyBalanceTotal Investment Company 20% 18% 23% Account Balances, and Loan 30s 18% $50,000 18% 14% 20% 17% 25% 14% 1996 expressed in this report are those of the authors and should not be ascribed to the officers, trustees, or other Number of Participants RESEARCH 48% Funds 1999Funds 2000 Funds (in percentage) Funds Contracts (GICs) Stock 50% >2–5 Years programs and sound public policy through objective research and education. EBRI is the only private, nonprofit, Funds Funds Funds Contracts Stock Value Funds$41,156 Other Unknown Total Investment Options/Age Age Cohort $0–$250,000 50% Funds Funds 11,432 Funds 13%Funds 191,804 Funds Funds $1,309,024,357 Funds Funds Contracts (GICs) $ 6,825 Contracts (GICs) Stock Stock 15% 25% 30s 80% 12% Jun. 44% $150,000 40s 15% $37,323 1997 40% 18% 60s 300% >$250,000–$625,000 ® >5–10 Years 7,102 216,709 2,889,526,242 13,334 sponsors of EBRI, EBRI-ERF, or their staffs. Neither EBRI nor EBRI-ERF lobbies or takes positions on specific nonpartisan, Washington, DC-based organization committed exclusively to public policy research and education on Total 27.8% 6.2% 36.4% 20% 29.5% 100% 1–10 6,123 40,813 $40,000 $1,169,777,259 10% $28,662 15% 16% 11% All Plans 15%Age Cohort 13% 40s 13% Total 13%$ 58,850 13% $ 58,774 –0.1% 0–2 Years INSTITUTE 50s 1998 All Ages Combined >$625,000–$1,250,000 4,706 Plans With Employer-Directed and Participant-Directed Balances 241,214 38% 4,186,622,523 14% 17,356 40% 11–25 9,372 160,921 $3,812,754,903 $23,693 economic security and employee benefit issues. EBRI’s membership includes a cross-section of pension funds, 12% 12% 10% 26% 9% policy proposals. EBRI invites comment on this research. 40% 1–100 Age Cohort 56.7% 20.0% 6.7% 15% 6.2% 50s 7.6% 0.1% 20s 15.8% 7.9% 20s 17.8% 8,21915.2% 10,431 40.0% 26.9 1.0% 1.3% 1.0% 100% Jul. 10% >$1,250,000–$2,500,000 3,661 324,003 $30,000 6,530,029,301 20,154 Equity, bond, money, and/or balanced funds Total Balances (Employer-Directed 50s 70.4% 10.1% 8.8% 7.5% 1999 26–50 6,591 237,758 $6,058,581,664 $25,482 >2–5 Years businesses, trade associations, labor unions, health care providers and insurers, government organizations, and 60% 60s 20s 28.3 4.3 35.1 32.4 100 101–500 30s 13.5 6.3 63.512.0 13.1 15.0 49.5 7.5 1.1 6.2 1.9 6.2 0.7 0.8 100 Activity in 2000 30s 31,518 33,125 5.1 Equity, bond, money, and/or balanced funds, and GICs >$2,500,000–$6,250,000 30% 56.7 3,527 14.3 589,582 3.5 14,061,710,787 3.5 23,850 19.4% and Participant-Directed) 51–100 4,791 340,125 $9,888,643,074 $29,074 10% 10% 5% 2000 30% service firms. 60s 37% 40s 5% 30s 23.5 5.4 37.4 33.7 100 >5–10 Years 501–1,000 40s 11.4 6.4 40s 62.110.8 62,059 11.1 20.8 62,694 $20,000 46.2 7.6 1.0 1.6 6.2 2.0 6.0 0.6 3.8 100 200% 5% $100,000 Equity, bond, money, and/or balanced funds, 20s >$6,250,000–$12,500,000 31.8% 1,797 5.0% 570,534 0.6% 15,790,157,182 3.1% 27,676 3.6% 53.7% 30% Aug. 1,001–5,000 50s 101–250 10.3 40s 7.3 4,000 57.410.1 26.0 632,462 9.9 26.9 6.6 40.0 $19,603,810,814 5.7 37.9 2.7 29.5 5.8 $30,996 1.9 100 10.0 0.5 8.7 100 33% 50s 98,139 95,836 5% –2.3 40% and company stock >$12,500,000–$25,000,000 0 44.6 1,127 19% 5.8 710,427 7.9 19,955,665,951 5.8 28,090 >10–20 Years 31.8% 30s 27.9 19% 19% 19% 4.7 0.6 1.8 30s 4.9Chart 2 58.4 Chart 1 0 18% $10,000 251–500 50s for emplo 1,783 29.9 626,191 yee benefits r 7.5 $20,773,758,455 36.5 esearch 26.1 $33,175 100 20% 5% > 5,000 60s 8.7 10.7 60s 47.0 9.5 122,2406.0 37.7 115,206 27.2 4.4 –5.8 4.4 3.3 1.3 11.4 0.3 25.6 100 by Sarah Holden, ICI, and Jack VanDerhei, Temple University 38% Equity, bond, money, and/or balanced funds, 40s >$25,000,000–$62,500,000$40,000 26.0>$40,000 891>$60,000 4.7 1,104,852 >$80,0000.9 >$100,000 35,897,890,630 2.8 All 32,491 6.4 56.9 0 15% 20s 30s 40s 50s 60s All Ages Participants by Age and Tenure, 2000 401(k) Plan Characteristics by Number of Participants: 20% EBRI’s work advances knowledge and understanding of employee benefits and their >20 Years All 501–1,000 60s 1,086 51.3 41.9 759,671 8.0 8.0 $29,170,072,218 5.1 30.8 19.2 4.2 $38,398 100 10.4 18.6 Sep. All 20%10.5 8.0 10.5 27.0 38.8 2.6 1.8 0.5 13% 100 3 or less –$60,000 –$80,000 –$100,000 $- 20s >$62,500,000–$125,000,000 443 1,004,708 35 38,939,951,613 38,757 GICs and company stock 50s 26.2 43.4 5.5 5.6 1.4 2.0 3.6 1.7 10.1 18.9 50.9 27.7 ICI is the national association of the American investment company hat we do 0–2 >2–5 >5–10 >10–20 11% >30 All (including loan balances as a part of account assets) per active participant of The ratio of 401(k) account balance (at the current employer) to salary databases, see Holden and VanDerhei (January 2001 and February 2001) for >20–30 10% Age (percentage of participants) 10% to examine the relationship between account balances participants had outstanding loans at the end of 2000. EBRI/ICI D W atabase vs. Cerulli Estima 20% Cerulli Associ- tes for All separate accounts, and other pooled investments. Issue Brief, no. 218 (Employee Benefit Research • The change in At year-end Chart 8, Average Account Balance by Age and Tenure, importance to the nation’s economy among policymakers, the news media and the public. 100% 1,001–2,500 8% 8% 829 1,286,579 $54,801,654,262 $42,595 Asset 0% Source: Tabulations From the EBRI/ICI Participant-Directed Retirement Plan Data 29% Tables and Charts 8% 8% 1996 1997 1998 1999 T 2000 enures and EBRI Fellow >$125,000,000–$250,000,000 310 1,274,338 53,447,405,928 41,941 industry. Its membership includes 8,638 open-end investment companies 10% 60s Tenure (years) $50,000 7% 25.0 6.3 7% 2.3 7.2 15.3 41.4 $41,520 (U.S. Department of Labor, forthcoming), a figure that is within Plans Without Company Stock or GICs Tenure (years) Salary Range alone is not an indicator of preparedness for retirement. A complete analysis of a complete list of references. New research released since the beginning of this 6% 6% Plans Without Company Stock or GICs 23% 5% 5% 5% 5% Years of Tenure 401(k) Plans, 2000 5% 4% Source: Tabulations From EBRI/ICI P It does this by conducting and publishing policy research, analysis, and special reports on employee benefits issues; articip Collection Project. ant-Directed Retirement Plan 4% and age, tenure, and salary of participants. In addition, for those with outstanding loans at the 1–10 11–25 26–50 51–100 ates, Inc. 101–250 251–500 501–1,000 2%Similarly, bond funds are any pooled account primarily Institute, (February 2000). 1,001– 2,501– 0% 5,001– >10,000 account balance in All 2000, about 2000............................................................................ 17 (“mutual funds”), 498 closed-end investment companies, and seven sponsors All >$250,000,000 26.2 371 5.2 5,599,085 year includes Choi, Laibson, Madrian, and Metrick (October 2001), which 1.2 386,807,405,918 3.5 69,084 8.8 52.9 Oct. 12 percent of the $47,004 average balance estimate from the 1998 EBRI/ICI 1–100 2,501–5,000 0–2 Established in 1978, the E 72.4 368 25.0 1,294,131 9.0 3.7 preparedness for retirement would require estimating projected balances at $57,003,203,623 8.9 37.4 mplo 33.9 7.9 yee B $44,047 enefit R 100 Years esearch 0–2 20.2 8.2 23.4 16.4 26.2 11% 2.2 2.0 1.4 100 10% Overview & Allocation Data Collection Project. 20s 77.7 8.0 7.1 5.8 Table of 2,500 5,000 10,000 Plans holding educational briefings for EBRI members, congressional and federal agency staff, and the news media; and 10% Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data of unit investment trusts. Its mutual fund members manage assets of 0% Table 1, EBRI/ICI Database: 401(k) Plan Characteristics discusses the impact of default investment allocations used with automatic Source: Tabulations From EBRI/ICI Particip By Age ant-Directed Retirement database. Cerulli Associates (2001) estimates an average account balance >2–5 25.8 4.8 retirement by also considering retirement income from Social Security, defined 37.4 31.9 100 101–500 >2–5 5,001–10,000 19.3 8.3 71.5 227 17.3 1,582,919 9.7 15.4 35.7 $79,719,905,764 9.2 1.5 6.9 $50,363 1.7 0.7 100 Chart 9, Account Balances Less Than $10,000 by Age 0end of 2000, the level of the unpaid balance repre- “Market Investment Company Institute. Quarterly Supplemental invested in bonds, and balanced funds are pooled ac- 2000 varies with 42 million 30s 78.7 8.6 6.4 4.7 Collection Project. Plan Data Collection Project. approximately $7 trillion, accounting for approximately 95 percent of total sponsoring public opinion surveys on employee benefit issues. Plan Assets enrollment (when employees must opt out of the 401(k) plan rather than opt EBRI’s Education and Research Fund (EBRI-ERF) (including loan balances as part of account assets) of $41,919 for 2000. Profit Participant-Directed Balances Only <$10,000 Institute (EBRI) is the only nonpr >$40,000–$50,000 Number of Particip benefit plans, IRAs, and other defined contribution plans, possibly from ants in Plan >$100,000 ofit, nonpartisan All >10,000 >5–10 197 25.7 35,367 4,865,686 6.6 11,827,256$297,813,228,397 37.4 $579,815,390,433 30.3 $61,207 100 $49,024 Median 501–1,000 >5–10 15.9 7.9 69.7 14.3 9.2 19.6 38.2 10.3 1.3 7.1 2.2 Median Age: 42 y 0.5 ears 100 Equity Funds Balanced Funds • This Issue Brief Comp examines asset allocation, account balance, and loan activity of a any Stock by Number of Plan Participants, 2000 Bond Funds Money Funds Guaranteed Investment ....................... 4 Nov. Bibliography 0 40s 74.1 9.7 7.7 6.1 American sented 14 percent of the account balance, net of the and Tenure, 2000 ...................................................... Update: The 17 Data. Washington, DC: ICI. counts invested in both stocks and bonds. Company stock participant age. For • The average 0 Relationship of Age and T industry assets and represent more than 88 million individual shareholders. (percentage of plan assets) enure to in); and Fidelity (2001), which analyzes the activity of participants in defined Sharing/401(k) Council of America (2001) suggests that the average account previous employment. For references to such research, see Holden and 20s performs the charitable, educational, and scientific functions of the Institute. EBRI-ERF is a tax-exempt organization 40.8 6.4 0.8 3.6 4.3 41.3 1,001–5,000 >10–20 11.8 >10–20 $0 7.4 68.9 11.9 27.7 10.7 22.7 7.9 41.6 9.0 36.9 1.7 27.6 8.5 2.3 100 0.5 Contracts100 $20,000 Summary 50s In the EBRI/ICI 67.4 10.8 participants, the average account balance of participants 9.3 8.4 $20,000 >$30,000 >$40,000 >$50,000 >$60,000 >$70,000 >$80,000 >$90,000 >$100,000 th Contents All large and representative group of 401(k) plan participants as of year-end 2000, using 35,367 11,827,256 Investment Category Table 2, EBRI/ICI Database: 401(k) Plan Characteristics $579,815,390,433 $49,024 100% >$50,000 contribution plans more generally. balance (also including loans) for participants in their 2000 survey, which unpaid loan balance. $20,000 >$30,000 401(k) Indus- organization committed to original public policy >$40,000 >$60,000 VanDerhei (January 2001 and February 2001). Profit Sharing/401(k) Council of America. is equity in the plan’s sponsor (the employer). Money >$70,000 >$80,000 >$90,000 >$100,000 60s example, the 44 workers held Annual Chart 10, Account Balances Over $100,000 by Age and Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 4 asset allocation 30s Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 0 >20–30 42.0 33.0 7.08.6 35.3 0.8 23.12.4 100 6.6 39.0 > 5,000 >20–30supported by contributions and grants. 8.6 Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 7.1 71.2 9.0 The American Savings Education Council (ASEC) and the Consumer Health 10.6 28.8 41.5 7.2 2.3 6.8 2.1 0.3 100 0–2 >2–5 >5–10 >10–20 >20–30 >30 In this effort, EBRI and ICI have collected data from some of their members –$30,000 –$40,000 –$50,000 –$60,000 –$70,000 –$80,000 –$90,000 –$100,000 Account Balances 60s 55.8 12.5 13.8 12.4 20s –$60,000 –$30,000 –$40,000 database, the –$50,000 –$70,000 in their 20s rose about 27 percent in 2000, while the –$80,000 –$90,000 –$100,000 Dec. includes profit-sharing and combination plans, as well as 401(k) plans, is $15,246 6% 40s data gathered by the Employee Benefit Research Institute (EBRI) and the Invest- 40.7 7.1 1.5 4.0 9.0 34.9 Source: Tabulations From EBRI/ICI P All articip > 30 ant-Directed Retirement Plan Data Collection Project. 70.4 43.5 10.1 8.4 36 14 by Plan Assets, 2000 8.8 30.5 17.7 7.5 ................................................... 100 6 Account >30 6.6 Note: Components may not sum to 100 percent due to rounding. 0–2 10.3 >2–5 7.1 >5–10 37.4 >10–20 32.0 >20–30 5.1 1.0 >30 0.2 100 • that serve as plan record keepers and administrators. The data include EB Loan activity varies with age, tenure, salary, and Tenure, 2000 RI Education Council (CHEC) are programs of EBRI-ERF. They are coalitions of private- and public-sector institutions .............................................................. Cerulli try.” The Cerulli18 funds consist of those funds designed to maintain a Survey of Profit Sharing and 401(k) Plans: Reflecting In some analyses, the subset is restricted to participants earning $20,000 or average account 401(k) plan of 401(k) partici- See Holden and VanDerhei (October 2001) for a complete discussion of 12% Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. approximately $75,700. 80% research and education on economic security and $13,493 Salary Range Plans With GICs $15,000 50s reported 37.7 7.5 average account balance of participants in their 60s fell 2.0 5.1 12.6 32.0 All 10.5 8.0 10.5 27.0 38.8 2.6 1.8 $13,038 0.5 100 demographic information, annual contributions, plan balances, asset Years of more. The median salary in that subsample is about $44,800. Tenure with the goals of public education on saving, retirement planning, health insurance, and health quality. EBRI/ICI ment Company Institute (ICI) in their collaborative effort known as the EBRI/ICI Salary Range EBRI/ICI findings and others’ research on the relationship between Table 3, Average Asset Allocation by Age, 2000 ............ 8 Salary Chart 11, Ratio of Account Balance to Salary by Age Report account balance. Plans With GICs . Boston, MA: Cerulli Associates, 2001. Years of Tenure stable share price. Guaranteed investment contracts 2000 Plan Year Experience accounts with a total of $1.8 trillion in assets. Balances $11,873 . Chicago, IL: Profit Shar- balance of partici- Among participants in the 2000 EBRI/ICI database, pants in the 2000 Chart 23 $11,600 Overview and Summary ................................................ 3 30 20s 60s 32.4 64.5 7.9 15.7 3.1 3.5 9.2 4.0 18.7 9.2 26.0 2001 allocation, and loan balances. Approximately 1 percent of the participants in the database had a missing contribution rates and salary. Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. EMPLOYEE account balance about 6 percent (table 11). For younger participants, 1–100 $20,000–$40,000 emplo 44.4 29.6 yee benefits. 28.8 8.8 15 5.1 40.1 21.5 4.9 100 13.6 60% Participant-Directed Retirement Plan Data Collection Project. The EBRI/ICI data Table 4, Average Asset Allocation by Age and 50s 12% At the end of 2000, approximately 59 percent of balanced mutual fund Choi, James J., David Laibson, Brigitte Madrian, and Loan Balances as a Percentage of Account B (GICs) are insurance company products that guarantee a ing/401(k) Council of America, 2001. in 401(k) accounts represent an important component of alances for Participants with Loans pants in their 20s Cerulli Associates (2001) estimates that there were and Tenure, 2000 30s All ...................................................... Source: Source: TaT bulations From EBRI/ICI P abulations From EBRI/ICI P 38.5 65.1 articip articip ant-Directed Retirement Plan Data Collection Project. ant-Directed Retirement Plan Data Collection Project. 18 7.4 15.2 ties—the sum of equity funds, company stock, and the 1.8 3.2 4.9 2.9 11.5 10.8 33.2 there is a positive correlation between age and EBRI/ICI data- birth date, were younger than age 20, or were older than age 69. They were Balances Asset Allocation ........................................................... Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 4 Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 5 >$40,000–$60,000 26.6 8.6 37 40.8 24.0 100 101–500 49.1 20.6 $10,000 4.1 4.7 18.4 Other recent studies of 401(k) plan participants have focused on one or a represents contributions are of greater importance in percentage assets were invested in equities. See Investment Company Institute, Quarterly 21% Chart 17 Specifically, contributions of high-income participants are constrained by 40s 60.5 14.7 3.3 3.2 15 15.5 collection project is the most comprehensive source of 401(k) plan participant-level by Account Balance, 2000 not included in this analysis. 30 Investment Options, 2000 .......................................... 9 Note: Row percentages may not sum to totals due to rounding. 327,364 401(k) plans at year-end 2000 with about Chart 12, Ratio of Account Balance to Salary for Andrew Metrick. “Defined Contribution Pensions: BENEFIT EBRI Issue Briefs equity portion of balanced funds. U.S. Department of Labor. Pension and Welfare Benefits holding accounts in both 1999 and 2000 increased specific rate of return on the invested capital over the life many U.S. households’ financial net worth and will be a are monthly periodicals providing expert evaluations of About half of their 14 percent (chart 20). However, there is variation around account balance. base was essentially unchanged from year-end 1999, Examination of the age composi- EBRI’s ovearning $40,000 or less a year to 10 percent for partici- erall goal is to promote soundly con- Account Balances ........................................................ >$60,000–$80,000 Sour 17.8 ce and 4 9.0 45.8 27.3 100 few large plans, the plans of a particular record keeper, or household survey 40% 501–1,000 54.4 17.4 Supplemental Data. 3.4 3.8 18.3 election deferral limits in Internal Revenue Code (IRC) Sec. 402(g) and Actual 50s ur publications Percent Plans With Company Stock Investment Option But No Employer-Directed Contributions 55.1 age of Eligible P 13.9 articip 3.6ants 3.6 21.2 retirement Ch Table 3 art 7 terms than other factors because these participants’ O 12 31 data available to date, and contains 11.8 million active 401(k) plan participants in Table 5, Average Asset Allocation by Plan Size and employee benefit issues and trends, as well as critical analyses of employee data. For a more complete discussion of recent research, see Holden and 1,001–5,000 >$80,000–$100,000 57.3 14.5 11.3 8.3 Administration. significant source of income for many individuals in 3.0 45.9 31.3 3.0 Private Pension Plan Bulletin, 100 22.9 42.1 million participants and $1,766 billion in assets. A rollover from a previous employer’s plan could interfere with this Plan Rules, Participant Decisions, and the Path of Participants in Their 20s by Tenure, 2000 .............. 19 Deferral Percentage and Actual Contribution Percentage (ADP/ACP) account balances are invested in equity funds, 19 percent about 27 percent over 2000 because contributions of the contract. Other stable value funds include syn- tion of account balances finds that 56 percent of despite the volatility in equity markets in 2000. 40% pants earning in excess of $100,000 (chart 22). Loan this average with age, tenure, salary, and account Plan Loans 60s................................................................... 39% 34 42.4 4 13.2 3.9 4.4 33.8 Total Balances With Loans by Sa16 lary, 2000 RESEARCH Tenure Composition of Selected Account Average Asset Allocation by Age, 2000 Type of $5,000 Unless otherwise indicated, all asset allocation averages are expressed as a balances of less than $10,000. ceived employee benefit programs. EBRI does not assets held in the 401(k) plan at the participant’s VanDerhei (January 2001 and February 2001). For earlier references to The EBRI/ICI >$100,000 14.8 8.4 account balances tend to be small compared with typical Relationship Between Account Balances 44.1 32.7 100 positive correlation because a rollover could give a short-tenure employee a 20% > 5,000 benefit policies and proposals. Each issue, ranging in length from 16–28 pages, thoroughly explores one topic. 63.2 9.1 nondiscrimination rules in IRC Secs. 401(k) and 401(m). 3.1 10 3.0 19.2 EBRI 35,367 plans with $579.8 billion in assets. The 2000 database accounts for 11 percent Investment Options, 2000 ........................................ 10 participants in their 40s with two or fewer years of than $10,000. For example, 91 percent of participants in 30s pants in their 20s with two or fewer years of tenure is Least Resistance.” Working Paper. Prepared for the 20s 32% 53.9 9.1 typically are large relative to existing account balances with salary. However, tax code contribution limits and thetic GICs Abstract of 1998, Form 5500 Annual Reports retirement. This 2.6 or similar instruments. The “other fund” 6.6 Issue Brief examines asset allocation, 6.6 18.4 . Wash- Relative to these estimates, the 2000 EBRI/ICI database Chart 13, Ratio of Account Balance to Salary for in company stock, and 8 percent in balanced funds balance. There is only slight variation in loan ratios participants with account balances of less than Among 401(k) participants in the 2000 EBRI/ICI ratios also tend to decrease as account balances increase. dollar-weighted average. The EBRI/ICI Database .................................................. Balance C 5ategories, 2000 (percentage of account balances) research using other participant-level databases, see VanDerhei, Galer, Plans With Company Stock high account balance. All 56.7 14.3 3.5 3.5 19.4 In a given age group, longer tenure means a current employer. Retirement savings held in plans at Notes is a monthly periodical providing current information on a variety of employee benefit topics. 25% Chart 14 contributions. In contrast, for older participants, invest- EBRI’s Washington 29% INSTITUTE 30s Data 54.5 23% 8.8 23% 2.216 4.7 6.8 20.4 ® of all 401(k) plans, 28 percent of all 401(k) participants, and about 33 percent of the 28% Table 6, Impact of Company Stock on Asset Allocation tenure is $12,145, compared with $89,874 for partici- lobby or endorse specific appr The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), their 20s with two or fewer years of tenure have account oaches. Rather, it pro- and Salary accounts for 11 percent of all 401(k) plans, 28 percent of 13 percent, while the average ratio for participants in National Bureau of Economic Research (NBER) Tax Quick, and Rea (January 1999). Participants in Their 60s by Tenure, 2000 20s .............. 50.9 20 5.4 (chart 3). and more than offset investment returns. Relative to nondiscrimination rules (which aim to assure that ington DC: U.S. Department of Labor, forthcoming. category is the residual for other investments such as account balance, and loan activity of a large and repre- 21% 4.1 5.4 32.8 among participants with loans in differing plan sizes. $10,000 are in their 20s and 30s, while less than one- database, three-quarters of plan balances are invested 30% Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Indeed, the loan ratio for participants with account 17 Source and Type of Data 0 ............................................. 5 Table 10 Participants in their 20s hold approximately 2 percent of the assets in the 32 Bulletin provides sponsors with short, timely updates on major federal developments in employee benefits. Availability of Plan Loans by Pl $-an Size, 2000 EBRI’s higher percentage of people with account balances 40s 49.4 9.4 2.4 4.8 9.6 22.2 previous employers or rolled over into individual retire- Approximately 10 percent of the participants in the database had a Plans With Company Stock which includes an array of reforms related to retirement savings, raises the ment return is of greater importance because their 24% 30s assets held in 401(k) plans. 3% 50.7 5.3 by Age, 2000 4.1 .............................................................. 18% 4.4 33.5 11 DatabaseNote: Row percentages may not add to 100 percent because of rounding. 20% Guaranteed Other pants in their 40s with more than 20 years of tenure. their 60s with two or fewer years of tenure is 35 percent. 6 <100 100–500 501–1,000 1,001–5,000 >5,000 ________. employees of all income ranges attain the benefits of the balances of less than $10,000, compared with 58 percent 2000 EBRI/ICI database; participants in their 30s hold 15 percent; real estate funds. The final category, “unknown,” con- sentative group of 401(k) plan participants as of year-end Private Pension Plan Bulletin, Abstract of all 401(k) participants, and about 33 percent of 401(k) Chart 14, Availability of Plan Loans by Plan Size, Policy and the Economy Conference, Washington, DC, Average Asset Allocation by Salary and Investment Options, 2000 17% contributions, investment returns are more significant Over the past five years, the percentage of 1996 1997 1998 1999 2000 fifth are in their 50s or 60s (chart 6). Similarly, of directly or indirectly in equity securities. Fifty-one balances of less than $10,000 is 39 percent, while the Distribution of Plans, Participants, and Assets For example, the S&P 500 was down 10 percent in 2000, its largest annual Loan ratios tend to decrease as age increases, 50s Fundamentals of Employee Benefit Programs 43.5 (percentage of plans off offers a straightforward, basic explanation of employee benefit programs 10.1 ering loans) 3.0 5.5 13.1 22.8 missing tenure range and were not included in this analysis. In addition, for 1–100 vides balanced analysis of alternativ 47.1 21% 6% 7.6 contribution limits applicable to 401(k) plan participants. 6.0 11.7 es based on the 27.4 100% 16% Several EBRI greater than $100,000. For example, about 7 percent of 6% P 40s articipants Participants Participants Particip 46.6 ants P 19% articip 5.7 ants 5.4 5.4 34.0 ment accounts (IRAs) are not included in this analysis. Age Equity Balanced Bond Money Investment account balances tend to be large relative to their annual This section examines how the ratio of 2000 account participants in their 40s hold 34 percent; participants in their 50s hold Company Stable 1 37 11 Table 7, Asset Allocation Distribution of Participant Years The increase in account balance as tenure increases is decline since 1981. The Russell 3000 fell about 9 percent, which was its (percentage of account balances) of participants in their 20s with five to 10 years of tenure one data provider, “years of participation” are used for the tenure variable. Furthermore, for a given age group, the ratio of account October 30, 2001. Draft, October 1, 2001. 60s 34.2 10.5 for older participants, and the average account balance 401(k) plan) 1997, Form 5500 Annual Reports sists of funds that could not be identified. 2000. 18% 3.6 restrain these individuals’ ability to save. 7.3 20.0 . Washington DC: 22.8 plan assets. The distribution of assets, participants, and 2000101–500 ............................................................................ 20% in the private and public sectors. 59.2 The EBRI Databook on Employee Benefits 8.6 20 participants’ account balances invested in equity funds 8.5 is a statistical reference volume on employee 8.7 14.5 dropping steadily from 30 percent for participants in those with account balances greater than $100,000, percent of plan balances are invested in equity funds, loan ratio for those with account balances in excess of 17% by Plan Size ............................................................ 15% 5 38 50s 43.4 6.1 8.4 6.3 31.3 36 percent; and participants in their 60s hold the remaining 13 percent of the Cohort Funds Funds Funds and ICI mem- Funds 15% Contracts Plan-specific information on loan provisions is available for the majority of Stock Value Funds Other Unknown Total participants in their 60s with 10 or fewer years of tenure 12% 15% Account balances are net of unpaid loan balances. largest annual decline since 1981. contributions. However, some participants in their 60s All facts. 46.1 Through its activities, EBRI is able to fulfill its 9.7 balance to 2000 salary varies with age, tenure, and 2.8 14% 5.4 11.8 14% 22.2 100% 501–1,000 • In 2000, equity markets experienced substantial volatility, and broad market 52.6 6.5 Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Account Balances to Equity Funds by Age, Tenure, 6.6 9.2 22.5 33 largest for participants in their 50s and 60s. benefit programs and work force related issues. (chart 9). Older workers display a similar pattern. For 88% 13% 88% 87% 86% plans in the EBRI/ICI database for 2000 is similar to Fidelity Investments. Chart 15, Percentage of Eligible Participants With balance to salary rises as tenure increases. For example, 60s Building Futures, Volume II: 37.2 6.4 has moved up (chart 3). At year-end 2000, equity funds among participants in their 60s fell almost 6 percent in assets. U.S. Department of Labor, Winter 2001. This research uses data gathered by the Em- 15.5 7.1 26.1 their 20s to 9 percent for those in their 60s (chart 20). There is some discernible evidence of rollover assets among the partici- about half are in their 50s and 60s, while only 11 per- 19 percent in company stock, and 8 percent in bal- $100,000 is only 7 percent (chart 23). the plans in the sample (including virtually all of the small plans). Some Relationship of Database Plans to the Universe 83% company stock or balanced funds (table 8). As a result, GICs and company stock are offered as investment 35 40s bers provided records on active participants in 401(k) 80% Equity Balanced 82% Bond Money Guaranteed Investment Company have account balances in excess of $100,000 (chart 10). 7 1,001–5,000 Particip 10% ants 50.8 7.5 Collection Project. 6.8 7.6 24.9 may be making withdrawals as well. salary. The ratio of participant account balance to >30 Years “Funds” include mutual funds, bank collective trusts, life insurance 2 pants with account balances greater than $100,000 as 1 percent of them have indexes witnessed their largest annual declines in nearly 20 years. In this market plans without this information are classified as having a loan provision if any and Salary, 2000 ....................................................... 12 20s 7 61.4% 8.6% 4.3% 4.3% 4.0% 15.4% 0.5% 0.7% 0.5% 100% Opportunities and Challenges for Workplace Savings for participants in their 60s with more than 30 years of The distribution of account balances underscores 16% 76% ________. 2000. However, some participants in their 60s may be ployee Benefit Research Institute (EBRI) example, 72 percent of participants in their 60s with two Private Pension Plan Bulletin, Abstract of and the that reported for the universe of plans estimated by Loans by Age, 2000 ................................................... mission to adv 21 ance the public represent 51 percent of participants’ assets, compared a 18 ’s, the media’s, and cent are in their 30s and virtually none are in anced funds. Plans With Company Stock and GICs 27 Loan ratios vary only slightly when participants 32% Likewise, loan ratios tend to decrease as tenure in- of Plans Salary 10% Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. .................................................................... (percentage of particip Funds ants) Funds 5 Distribution of Plans, Par For convenience, minor investment options are not shown. Funds Funds Contracts (GICs) 7% ticipants, and Stock Availability > 5,000 42.9 5.4 Participant account balances are net of plan loans. 8.2 5.4 33.6 29% participants with no equity funds have 45 percent plans they administered from year-end 1996 through separate accounts, and any pooled investment product primarily invested in of options, there is very little variation in the allocation of However, about 35 percent of participants in their 60s two or fewer years of tenure and 3 percent of them have between two and five 80% participant in the plan has an outstanding loan balance. This may understate >20–30 Years 30s 60.2 8.0 3.8 68% 3.3 4.6 salary is positively correlated with age and tenure. 18.4 0.4 0.8 0.4 100 13 3 Changes in Account Balances environment, many equity owners earned negative investment returns. Neverthe- 5% Table 8, Percentage of Participants Without Equity Fund b the effects of age and tenure on account balances. In a 20s Note: Minor investment in other stable value funds and “other” are not shown; therefore, row percentages will not add to 100 pe 49.0 34% 6.0 or fewer years of tenure have account balances of less 2.1 2.0 7.3 rcent. Employer- 31.4 in America, A Report on Corporate Defined Contribu- tenure, the ratio of account balance to 2000 salary is All 44.6 5.8 making withdrawals as well. Investment Company Institute (ICI) 1995, Form 5500 Annual Reports. 7.9 5.8 Washington DC: in their collabora- 31.8 Cerulli Associates (chart 1). Chart 16, Percentage of Eligible Participants With with 44 percent of total balances in 1996. This increase Sample of participants changes over time. creases, falling from between 24 percent and 25 percent • their 20s. the security indicated (see pg. 5 for definitions of the investment categories Participants’ asset allocation decisions vary with age.Contact EBRI Publications, (202) 659-0670; fax publication orders to are grouped based on the size of their 401(k) plans years of tenure. The Typical 401(k) Plan Participant 100% .......................... 6 the number of plans offering loans (or participants eligible for loans) because 19 60% account balances in equity-related investments (table 9). 40s 54.8 8.0 4.2 3.8 7.5 account balance to GICs across the different income Plans offering the “base” group of options cover 28 percent of the partici- 19.7 0.6 >10–20 Years 1.0 0.4 100 year-end 2000. These plan administrators include Plans Without Company Stock or GICs 60% policymakers’ knowledge and understanding of em- Assets by Plan Size of Plan with 21 to 30 years of tenure with their current employer Account Balances at Year-End 2000 58% 30s ubscriptions/orders 50.5 5.6 1.8 1.5 8.4 31.1 directed balances are invested in the plan sponsor’s company stock. Participants in their 60s, having had more time to used in this paper). At the end of 2000, 59 percent of balanced fund mutual S less, statistics from the EBRI/ICI database indicate that 401(k) plan participants in Balances Who Have Equity Exposure by Age and given age group, fewer years of tenure mean a higher(202) 775-6312. Subscriptions to some plans may have offered, but had no participant take out, a plan loan. It than $10,000. In contrast, only 20 percent of those in EBRI Issue Briefs are included as part of tion Plans 305 percent. Loans by Tenure, 2000 . Boston, MA: Fidelity Investments, 2001. .............................................. 0 21 • in allocation to equity funds in part reflects the strong At year-end 2000, the average account balance (net of tive effort known as the EBRI/ICI Participant-Directed pants in the database and 20 percent of the assets. U.S. Department of Labor, Spring 1999. for participants with five or fewer years of tenure to 34 As also shown in previous years, younger participants 50s Plans With Company Stock and GICs 49.2 8.0 5.3 4.4 11.5 (measured by the number of plan participants). On 19.1 1.1 1.0 0.4 100 Asset Allocation $20,000–$40,000 0 ............................................................... 64.5% 69.8% 11.7% 7.1% >5–10 Years 60% 50% 30% Two possible explanations for the low account balances among this group 40s 47.0 5.7 groups (table 10, bottom panel). 1.9 1.6 13.5 29.4 mutual fund companies, insurance companies, and have account balances greater than $100,000. The This section examines the change in account balances of fund assets are invested in equities. See Investment Company Institute, By Tenure (years) is likely that this omission is small as the U.S. General Accounting Office 80% Cerulli accumulate assets, have higher ratios, while those in EBRI membership, or as part of a $199 annual subscription to Plan Loans EBRI Notes and EBRI Issue Briefs. Individual copies are Loans 4 1–100 44% aggregate did not experience or make significant changes to their 401(k) accounts plo $40,000 48.2yee benefits and their importance to our nation >$40,00015.8 >$60,000 >$80,000 Tenure, 2000 3.3 >$100,000 .............................................................. All 5.5 12.1 ’13.0 s 12 60s 39.8 8.0 7.7 5.4 19.3 16.3 2.2 0.9 >$100,000 0.4 100 Hewitt Associates, LLC. percentage of participants with account balances of less >$40,000–$60,000 The ratio of account balance to salary varies <$10,000 Trends & Experience in 401(k) $10,000 >$20,000 >$30,000 71.0 >$40,000 9.5 >$50,000U.S. General Accounting Office. “401(k) Pension Plans: >$60,000 plan loans) for all participants was $49,024, and there Retirement Plan Data Collection Project. their 60s with more than 20 years of tenure have account 11.3 >$70,000 >$80,000 5.2 >$90,000 All Account The EBRI/ICI are: (1) that their employer’s 401(k) plan has only recently been established Chart 17, Percentage of Eligible Participants With performance in equity markets over much of this period. 20 >2–5 Years tend to concentrate in equity fund investments, while 50s 42.4 5.6 average, participants in plans with 100 or fewer partici- The 2000 EBRI/ICI database contains 35,367 401(k) 2.1 1.8 19.9 27.6 The T 8 percent for those with more than 30 years of tenure Asset Allocation by Age and Investment Options Quarterly Supplemental Data. ypical 401(k) Plan Participant ..... 6 The average account balance (net of plan loans) for all Plans offering GICs in addition to the “base” group of options cover (1997) finds that more than 95 percent of 401(k) plans that offer loans had at or Less –$60,000 –$80,000 –$100,000 a group of participants who held accounts at both year- consulting firms. The universe of plan administrators percentage increases to 44 percent for participants in 40% Asset Allocation by Salar All 101–500 51.3 available with prepayment for $25 each (for printed copies) or for $7.50 (as an e-mailed electronic file) by calling EBRI/ICI 8.0 –$30,000 y 5.1 –$40,000 48.1 4.2 –$50,000 12.4 –$60,000 10.4 Chart 5 –$70,000 18.6 3.3 –$80,000 1.0 –$90,000 3.0 –$100,000 0.9 Median 17.7 Tenure: 6 y 0.4 ears Balances 11.5 100 >$60,000–$80,000 74.6 8.5 their 20s have the lowest ratios (chart 11). For example, 10.2 4.7 (indeed, 49 percent of all 401(k)-type plans in existence in 1995 were –$20,000 60s during 2000. 34.1 5.3 Table 9, Average Asset Allocation for Participants 39% 2.2 2.1 32.8 22.9 25% 22 percent of the participants in the database and 17 percent of the assets. 0–2 Years Plans somewhat with salary. For example, among participants . Lincolnshire, IL: Hewitt Associates, 1999. least one plan participant with an outstanding loan. is a wide distribution of account balances around that data collection project is the most comprehensive source Loan Provisions Enhance Participation But May Loans by Salary, 2000 40% ............................................... 21 The allocation to equity funds in 2000 was down only (chart 21). 8 older participants invest more in fixed-income assets. 60% pants have borrowed 18 percent of their account balance, plans with $579.8 billion in assets and 11,827,256 © 2001. Asset Allocation by Plan Size and Investment economy. participants in the EBRI/ICI database was $49,024 at Salary Range employer-directed contributions have 74 percent of their Account balances are net of unpaid loan balances. Thus, unpaid loan 501–1,000 Distribution of Account B 39.9 al 8.8 ances by Size of Account B average of 51 percent for all participants in the 2000 2.1 3.7 alance, 2000 18.4 25.2 established after 1989 (U.S. Department of Labor, Spring 1999, table B.10), or end 1999 and year-end 2000. Analyzing a group of varies from year to year; thus, aggregate figures in this >$80,000–$100,000 EBRI or from www.ebri.org. 75.3 Change of Address: 8.7 EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037, (202) 9.6 4.3 Fifty-eight their 60s with more than 30 years of tenure. the average ratio of account balance to salary for partici- Size of Account Balance Without Equity Fund Balances by Age and Tenure, Participants in 401(k) plans cover wide ranges of age and 39 21 Table 8>30 Holden, Sarah, and Jack VanDerhei. “Contribution Chart 18, Percentage of Eligible Participants With in their 20s, the ratio tends to increase slightly with balances are not included in any of the nine asset categories described. The Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 1,001–5,000 45.1 9.2 slightly from 53 percent in 1999, despite poor equity average (see endnote 8). Individuals with account of 401(k) plan participant-level data available to date. Affect Income Security for Some.” Plans offering company stock in addition to the “base” group of options 1.9 2.3 22.8 Letter Report 16.6 , 10/01/ (2) that the employee only recently joined the plan. In either event, job tenure • Employee Plan design also influences participants’ asset alloca- Furthermore, loan ratios tend to decrease as >$100,000 73.3 8.3 while participants in the largest plans, on average, have The median loan balance outstanding was $3,824 at year-end 2000. participants (table 1). Most of the plans in the database 9.3 4.6 Options .................................................................... (percentage of participants with account balances in specified ranges) 8 year-end 2000, which is 12 percent lower than the Salary information is available for a subset of partici- assets invested in equity securities. However, the Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 775-9132; fax number, (202) 775-6312; e-mail: Publications Subscriptions@ebri.org. Source: Tabulations From EBRI/ICI Particip EBRI/ICI database. Indeed, almost 30 percent of partici- ant-Directed Retirement Membership Information: Inquir- report generally should not be used to estimate time percent of the participants holding accounts in both 1999 and 2000 20% 33% 40% Since its inception, EBRI’s membership has 6% reported account balance represents retirement assets in the 401(k) plan at the Chart 9cover 20 percent of the participants in the database and 25 percent of the Percentage of Participants Without Equity would not accurately reflect actual 401(k) plan participation. Note: Row percentages may not add to 100 percent because of rounding. > 5,000 • The average asset allocation of 401(k) participants in the 2000 EBRI/ICI database 43.2 5.1 2000 2.0............................................................................ 1.6 18.4 29.0 13 tenure. Sixty-one percent of participants are in their 30s All 20% Plan Data Collection Project. 70.4 16% 10.1 8.8 7.5 salary for low-to-moderate salary groups (chart 12). Behavior of 401(k) Plan Participants.” 28 ICI Perspective, balances of less than $10,000 are primarily young The EBRI/ICI data are unique because they cover a wide 97, GAO-HEHS-98-5. Washington, DC: U.S. General 0–2 Benefit Loans by Account Balance, 2000 Note: Minor investment options are not shown; therefore, row percentages will not add to 100 percent. ies regarding EBRI membership, and/or contributions to EBRI-ERF should be directed to EBRI President Dallas .............................. 21 market performance in 2000. tion decisions. For example, participants tend to hold Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. a loan ratio of 13 percent (chart 24). are small, whether measured by the number of plan pants in the 2000 EBRI/ICI database. salary increases, falling from 19 percent for participants Asset Allocation of Employee and Employer Because asset average account balance of $55,502 at year-end 1999, but diversification in these equity security investments pants have more than 80 percent of their account 10% removes the effect of participants entering and leaving trends, unless this report indicates otherwise. Records participant’s current employer. Retirement savings held in plans at previous 45% plans for which loan data are available in the 2000 assets. All 43.4 5.6 Fund Balances Who Have Equity Exposure 2.0 1.7 18.9 27.7 Account Balances Less Than $10,000 by Age and Tenure, 2000 18% 44% Chart 11 >20–30 was essentially unchanged from year-end 1999, despite the volatility in equity Table 10, Average Asset Allocation by Salary and 6% and 40s, while 12 percent of the participants are in their Salisbury at the above address, (202) 659-0670; e-mail: salisbury@ebri.org Research However, at high salary levels the ratio tends to decline Vol. 7, no. 4 (Investment Company Institute, October Plans With GICs grown to represent a cr workers with short tenures. In contrast, those with variety of plan administrators and record keepers and, Accounting Office, October 1997. oss section of pension funds; 1% Chart 19, Percentage of Eligible Participants With 20% 3% employers or rolled over into individual retirement accounts (IRAs) are not a lower share of their accounts in equity funds when 3% participants or by total plan assets. Indeed, 44 percent of allocation is influenced by the investment options Contributions .......................................................... 9 4 percent higher than the $47,004 average account varies significantly between the two groups of plans. balances invested in equity funds, while 28 percent hold by Age and Tenure, 2000 plans on the overall average. About 80 percent, or were encrypted to conceal the identity of employers and (percentage of participants with account balances less th 22 EBRI/ICI database offer a plan loan provision to partici- an $10,000) 12% 0 Ra 0%tio of Account Balance to Salary by A Plans offering both GICs and company stock in addition to the “base” ge and Tenure, 2000 $20,000–$40,000 47.7 21.7 3.7 4.6 20.2% included in this analysis. markets in 2000. Among 401(k) participants in the 2000 EBRI/ICI database, three- Investment Options, 2000 ........................................ 13 20s and 6 percent are in their 60s (chart 2). The median Institute- 40% 29 somewhat. For example, for participants in their 20s 2001); and Loans by Plan Size, 2000 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. EBRI Issue Brief, no. 238 (Employee .......................................... 22 VanDerhei, Jack, Russell Galer, Carol Quick, and John account balances in excess of $100,000 are primarily therefore, a wide range of plan sizes offering a variety of the plan offers company stock and/or guaranteed <$10,000 >$40,000–$50,000 >$100,000 the plans in the database have 25 or fewer participants, Distribution of Equity Fund Allocations and Asset Allocation by Age and Investment balance at year-end 1998 (chart 4). 38 The median available to participants, table 10 presents asset alloca- When total account balances are considered, the no equity funds at all (table 7). The percentage of partici- group of options cover 30 percent of the participants in the database and 1–10 11–25 26–50 51–100 businesses; trade associations; labor unions; health car 101–250 251–500 501– 1,001– 2,501– 5,001– All e employees but were coded so that both could be tracked pants (chart 14). The loan feature is more commonly >10,000 8.3 million, of the participants with accounts at year-end 0 >$40,000–$60,000 51.1 21.6 3.8 4.5 16.8 9 Note: Minor investment options are not shown; therefore, row percentages will not add to 100 percent. 100% 5 Education quarters of plan balances are invested directly or indirectly in equity securities. Table 11, Average Account Balances Among 401(k) age of the participants in the 2000 EBRI/ICI database is with two to five years of tenure, the ratio of account Benefit Research Institute, October 2001). This system of classification does not consider the number of distinct 1,000 older workers or workers with long tenures. Forty-four investment alternatives. 38 percent of the assets. Rea. “401(k) Plan Asset Allocation, Account Balances, 5,000 10,000 Percentage With Company Plans Chart 20, Loan Balances as a Percentage of <100 Editorial Board: 350% 100–500 Dallas L. Salisbury, publisher; Steve Blakely, managing editor; Cindy O’Connor, production and distribution. Any 501–1,000 1,001–5,000 >5,000 creases, while the share in company stock rises with plan investment contracts (GICs) as investment options. and 32 percent have 26 to 100 participants. In contrast, 2,500 tion by salary range and by investment option. The data 16 percent. The tendency of younger participants to favor Participant Exposure to Equities >$60,000–$80,000 ........................ 55.0 11 19.4 company stock, but not GICs, as an investment option account balance was $13,493 at year-end 2000, which is panels). There is some variation in participant asset 3.4 4.1 15.7 overall exposure to equity securities through company pants holding no equity funds tends to increase with age 1999 had accounts at year-end 2000. The average 401(k) over multiple years. Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. associated with large plans (measured by the number of 35% Options investment options presented to a given participant, but rather the types of Participants Participants Participants Participants Participants Stock and/or Balanced Funds and Research providers and insurers; government organizations; and views expressed in this publication and those of the authors should not be ascribed to the officers, trustees, members, or othe Fifty-one percent of plan balances are invested in equity funds, 19 percent in Participants Present in Both 1999 and 2000, by Age r 42, the same as in 1999. Forty percent of the participants ________. “The Impact of Employer-Selected Investment balance to salary rises from 22 percent for salaries >$80,000–$100,000 58.1 18.8 Chart 24percent of participants have account balances of less 23 and Loan Activity.” 3.5 The 2000 EBRI/ICI database contains 11.8 3.7 ICI Perspective 13.8 , Vol. 5, no. 1 Account Balances for Participants with Loans • size (table 5, top panel). This trend mainly occurs Assets allocated to equity funds vary across partici- Note: Components may not sum to 100 percent due to rounding. only 5 percent of the plans have more than 1,000 partici- For recent EBRI/ICI research on the contribution activity of 401(k) plan 20s show that asset allocation differs somewhat with salary. equity funds and older participants to favor fixed-income Asset Allocation by Salary ........................................ 12 have dramatically lower allocations to equity funds and 11 percent lower than the median account balance of allocations by plan size among plans offering GICs, but Number of Participants in Plan stock and pooled investments is significantly higher for options presented. Preliminary research analyzing 1.4 million participants and tenure. For example, 28 percent of participants in account balance of this group of participants declined Data provided for each participant include 20s participants in the plan). Fifty-four percent of plans with sponsors of the Employee Benefit Research Institute, the EBRI Education and Research Fund, or their staffs. Nothing herein is to Fund.>$100,000 57.7 20.5 3.2 4.0 11.7 Loan Balances as a Percentage of Account Balances for Participants company stock, and 8 percent in balanced funds. participants, see Holden and VanDerhei (October 2001). Group ......................................................................... 14 have five or fewer years of tenure, while 6 percent have 300% 21 30s between $20,000 and $30,000 to 29 percent for salaries Options on 401(k) Plan Participants’ Asset Alloca- drawn from the 2000 EBRI/ICI database suggests that participants are not by Age, 2000 30% .............................................................. 22 than $10,000 in the 401(k) plan at the participant’s million active 401(k) plan participants in 35,367 plans (Investment Company Institute, January 1999); and securities holds up even when accounting for investment because few small plans offer company stock as an pants. About 30 percent of participants direct more service firms, including actuarial firms, emplo Chart 18 balanced funds than the base group. Participant asset allocation varies considerably with age not company stock, for example, the percentage of pants. Because most of the plans have a small number of ye Finally, in those e Account Balances ........................................................... 80% 14 $15,246 at year-end 1999, but 3 percent higher than the Age Cohort For example, participants with higher earnings tend to participants in plans with employer-directed contribu- be construed as an attempt to aid or hinder the adoption of any pending legislation, regulation, or interpretative rule, or as their 20s have no equity investments, compared with legal, participant date of birth, from which an age cohort is All 56.7 14.3 100 or fewer participants and 78 percent of plans with 3.5 3.5 19.4 only slightly in 2000. At year-end 2000, the average Plans All rights Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. With Loans by Plan Size, 2000 30s Chart 21 influenced by the sheer number of investment options presented. On average, 24 40s more than 30 years of tenure. The median tenure at the Chart 20 17 20s 53.2% between $70,001 and $80,000. Thereafter, the ratio falls tions: Preliminary Findings.” Working Paper. Percentage of Eligible P 23 articipants With Loans current employer, while 13 percent have balances EBRI Issue Brief Source of contribution (employer versus employee) can be matched to fund by Account B , no. 205 (Employee Benefit Research alance, 2000 25 Chart 21, Loan Balances as a Percentage of accounting, actuarial, or other such professional advice. with $579.8 billion in assets. The 2000 database accounts investment option. For example, less than 1 percent of than 80 percent of their account balances to equity participants, the asset size for many plans is modest. hold a somewhat larger share of the account balances in options offered by the 401(k) plan sponsor. Changes in Account Balances (percentage of plans) .................................. 14 plans that offer both GICs and company stock, company (table 3). contributions (table 6, middle panel), $13,038 median account balance at year-end 1998. account balances allocated to equity funds is higher in Younger participants tend to favor equity compared with portion of his or her salary to a plan account tions. For example, investments in company stock, and 42 percent of participants in their 60s. Similarly, 25 per- account balance of this consistent set stood at $58,774, assigned; participant date of hire, from which a tenure participants face 10.4 distinct options, but, on average, choose only 2.5 Loan B 101 to 1,000 participants offer loans to employees, alances as a Percentage of Account Balances reserved. Plans With Company Stock benefit consulting firms, law firms, accounting firms, 25% Loan Balances as a Percent 250% age of Account information for a subset of the data providers in our sample. Of those plans in 30s 50s 59.6 • The average account balance of participants who held accounts in both 1999 and 2000 Chart 1, 401(k) Plan Characteristics by Number of current employer is six years, which is one year less than 40s to 13 percent for salaries in excess of $100,000. Simi- Prepared for The Center for Pension and Retirement 100% greater than $100,000. for 11 percent of all 401(k) plans, 28 percent of all 401(k) Institute, January 1999). Account Balances for Participants With Loans participants in small plans are offered company stock as (Holden and VanDerhei, May 2001). In addition, the preliminary analysis funds, while about 28 percent hold no equity funds. funds, while older participants are more likely to invest About 32 percent of the plans have assets of $250,000 or equity funds, regardless of the investment options Account Balances at Year-End 2000 The mix of investment options offered by a plan 20% ........................ 14 stock appears to displace equity and balanced fund 22 percent of account balances in plans offering company larger plans (table 5, third panel). Furthermore, in plans There is wide variation in account balances determines how the assets in the account are invested, $20,000–$40,000 38.0 7.0 for P 5.5 articipants W >10–20 6.4 ith Loans by Tenure, 2000 41.3% equity funds, and the equity portion of balanced funds The positive correlation between age and 25% 18% 25% 25% 25% balance and tenure. Indeed, 63 percent of those partici- cent of participants with two or fewer years of tenure the 2000 EBRI/ICI database for which the appropriate data are available, only 0.1 percent below the average of $58,850 at year- range is assigned; outstanding loan balance; funds in EBRI Issue Brief 23% is registered in the U.S. Patent and Trademark Office. ISSN: 0887-137X 0887-137X/90 $ .50+.50 24% whereas 88 percent of plans with more than 5,000 40s 22% 61.9 Balances for Participants with Loans by Age, 24% 23% 23% 60s 17% 17% >2–5 60% found that 401(k) participants are not naïve—that is, when faced with declined only 0.1 percent in 2000. The change in a participant’s account balance is Participants: EBRI/ICI Database vs. Cerulli the median tenure in the 1999 EBRI/ICI database. and investment management firms. Cerulli larly, for participants in their 60s with 11 to 20 years of Research (CPRR) Current Pension Policy Issues by Tenure, 2000 >$40,000–$60,000 ......................................................... 37.8 11.2 22 • The ratio of account balance to salary in 2000 varies participants, and about 33 percent of the assets held in less than 0.5 percent require employer contributions to be invested in company 4.0 6.9 23% 33.7 sponsor significantly affects the asset allocation of the an investment option, while 75 percent of participants in However, 59 percent of participants with no equity 20% 50s holdings and GICs appear to displace other fixed-income in fixed-income securities such as GICs and bond funds. that offer company stock, but not GICs, the percentage of less, and another 33 percent have plan assets between 50s 63.8 Relationship of Age and Tenure to Account stock as an investment option but not requiring that around the average of $49,024 at year-end 2000. Ap- account balance is expected because younger workers are offered. Nonetheless, all income groups have substantial choosing among investment options made available by represent 82 percent of the total account balances for have no equity fund investments, compared with almost 2000 15% pants with account balances of less than $10,000 have 15% 15% participant’s investment portfolios; and asset values 80% participants include a loan provision. 22% end 1999 (table 11). From this standpoint, the balance of “n” options they do not divide their assets among all “n.” Indeed, less than 200% 18% 18% >$60,000–$80,000 20% 39.9 12.3 EBRI/ICI 25%stock. However, most of the plans with this feature are large, covering 3.1 5.3 29.3 comprised of contributions, investment returns, withdrawals, borrowing, and loan Estimates for All 401(k) Plans, 2000 14% 25% 14% ......................... 7 Salary information available for a subset of participants 24%22 60s 56.0 tenure, the ratio rises from 173 percent for salaries Conference, Miami University, Oxford, OH, June 8–9, with age, tenure, and salary. Account balances tend to 21% Chart 22, Loan Balances as a Percentage of 401(k) plans. plans with more than 5,000 participants are offered funds hold equity securities through balanced funds 15% $250,001 and $1,250,000 (table 2). However, participants 13% overall allocation to equity securities—the sum of equity account balance, and plan size. Of those participants in participants in a plan. Table 4 presents four combina- 1 percent of participants followed a “1/n” asset allocation strategy. Balances ................................................................ 15 investments. than $10,000 have loans outstanding (chart 18). Finally, employer contributions be invested in company stock On average, participants in their 20s have 61 percent of proximately three-quarters of the participants in the account balances invested in company stock tends to rise These effects tend to occur across all age likely to have lower incomes and to have had less time to the plan sponsor (employer). In many plans, the em- participants in plans with employer-directed contribu- 14% Today, EBRI is r 44 percent of participants with more than 30 years of ecognized as one of the most 60s five or fewer years of tenure, while 86 percent of those the “typical” participant was essentially unchanged in attributed to those funds. An account balance for each 6 percent of participants and 10 percent of plan assets in the subset. 30% >$80,000–$100,000 42.6 12.9 3.5 4.7 25.9 15% All 59.4 13% 30% 60% repayments. Chart 2, Participants by Age and Tenure, 2000 ............ 7 indicates that the median annual salary among that 18 between $30,001 and $40,000 to about 224 percent for 2001. Draft, May 2001. 20% rise relative to salary as age and tenure increase. In In 2000, equity markets experienced substantial Account Balances for Participants With Loans plans offering loans, the highest percentages of partici- company stock as an investment option. 10 and/or company stock. 15% starting with a base groups of participants. and assets are concentrated in large plans. For example, >5–10 funds, company stock, and the equity portion of balanced tions of investment offerings, Relationship Between Account Balances and >$100,000 40% 46.5 9.5 participants in smaller plans that offer loans are less (table 6, lower panel). their account balances invested in equity funds, com- 2000 EBRI/ICI database have account balances that are as plan size increases (table 5, fourth panel). The per- Did you read this as a pass-along? Stay ahead of employee benefit 6.3 4.8 26.4 ployer also makes a contribution to the participant’s 150% accumulate a balance with their current employer. In tions, compared with 74 percent of the total account A synthetic GIC consists of a portfolio of fixed-income securities “wrapped” participants with account balances greater than tenure. In contrast, the percentage of participants 2000. The change in a participant’s account balance is participant is the sum of the participant’s assets in all Could we send a friend or colleague a complimentary 25 14 20% For this group, the participant-directed portion of the account balances 11% authoritative and objective resources in the world on 14% Characteristics of Par 14% ticipants With Chart 3, Average Asset Allocation, 1996–2000 .............. 8 group is $29,500. 19% All 44.6 5.8 7.9 5.8 31.8 ________. “401(k) Plan Asset Allocation, Account Bal- salaries between $70,001 and $80,000, then falls to with a guarantee (typically by an insurance company or a bank) to provide by Salary, 2000 .......................................................... 23 addition, the ratio tends to rise with salary until salary volatility and broad market indexes witnessed their issues with your own subscription to EBRI Issue Briefs for only $49/33 pants with outstanding loan balances are among group consisting of plans that do not offer company stock 10% When plans are grouped by investment option 10% 8% pared with about 40 percent of account balances for 15%centage allocated to company stock in the smallest plans 76 percent of participants are in plans with more than Tenure (years) Salary 8 .................................................................... 18 lower than the average. Indeed, 44 percent of partici- Overall exposure to equity securities broadly funds. Indeed, the variation in allocation to all equity account, generally matching a portion of the employee’s balances for participants in plans without employer- 40% likely to have taken out a loan than participants in holding no equity funds tends to fall as salary increases. represents 65 percent of the total account balances. addition, they are less likely to have rollovers from a copy of EBRI Issue Brief? $100,000 have more than 10 years of tenure (chart 7). funds. 20% Plan balances are constructed as the sum of all the sum of three factors: new contributions by the 15% 10% 6% benefit payments according to the plan at book value. 10% 6 • The change in account balance in 2000 varies with participant age. For example, the 14% Chart 4, Participant Account Balances, 1996–2000 year electronically e-mailed to you or $99/year printed and mailed. 0–2 52.8 .... 15 19 140 percent for salaries in excess of $100,000 (chart 13). ances, and Loan Activity in 1999.” ICI Perspective, reaches $80,000. The ratio tends to decline slightly for Outstanding Loans Endnotes In this Chart 23, Loan Balances as a Percentage of Plans With Company Stock and GICs 26 employee benefit issues—health car largest annual declines in nearly 20 years. e, pensions, and and plan size, participants in plans of differing sizes 100% 1,000 participants, and these same plans account for 84 8% participants in their 30s, 40s, or 50s (chart 15). In Plan Loans or GICs. Participants in these plans—which generally ..................................................................... 19 defined is similar between the two groups, suggesting pants have account balances of less than $10,000, while participants in their 60s. Participants in their 20s invest is also high, but very few small plans fall into this previous job’s plan in their current plan accounts. securities tends to be much less across the different Account Balances contribution. Some employers require that the employer directed contributions. This higher allocation to equity larger plans (chart 19). For example, about 30 percent of participants earning 26 11% 4% Asset Allocation by Plan Size and 10% Examining the interaction of both age and participant and the employer; total investment return on participant balances in the plan. Plan size is estimated Percentages are derived from data presented in table 6. 9% >2–5 57.1 11 5% 3% For more information about subscriptions, visit our Web site at 3% 20% 20% $20,000–$40,000 average account balance of participants in their 20s holding accounts in both 1999 41.2 7.4 Chart 5, Distribution of Account Balances by Size of 1.8 1.1 18.1 29.3 Some administrators supplying data were unable to provide complete On average, Vol. 7, no. 1 (Investment Company Institute, January The tendency of the ratio of account balances to salaries greater than $80,000. market environment, many equity owners earned 2% Send an issue to Account Balances for Participants with Loans 5% 2% offer equity funds, bond funds, balanced funds, and generally do not seem to behave in systematically 5% percent of all plan assets (table 1). 2% income groups than the variation in allocation to equity addition, participants with five or fewer years of tenure Availability of Plan Loans ........................................ 19 that higher allocations to company stock are offset by only about 8 percent of their assets in GICs and bond 13 percent of participants have account balances greater category and it is possible that these figures may be Source: Tabulations From EBRI/ICI Participant-Directed contribution be invested in company stock rather than as >5–10 58.2 Likewise, tenure (or years of participation) and account securities holds across all age groups. 10% tenure with account balances reveals that, for a given between $20,000 and $40,000 a year hold no equity account balances, which depends on the performance of as the sum of active participants in the plan and, as economic security.27 www.ebri.org or complete the form below and return it to EBRI. asset allocation detail on certain pooled asset classes for one or more of their >$40,000–$60,000 43.6 6.7 Investment Options 5% Estimated as the sum of the 39 percent of account balances that is in 1.6 1.0 19.0 27.5 Most participants in 401(k) plans have borrowing and 2000 increased about 27 percent over 2000 because contributions typically are Account Balance, 2000 .............................................. 15 50% participants in Retirement Plan Data Collection Project. • The average account balance of participants who held 24 salary to peak at higher salary levels and then fall off 2001); and by Account Balance, 2000 EBRI Issue Brief, no. 230 (Employee ......................................... 23 negative investment returns. Nevertheless, statistics >10–20 62.7 or with more than 30 years of tenure are less likely to money funds as investment options—have the highest different ways. For example, asset allocation does not funds combined, while those in their 60s invest 27 per- heavily influenced by a few outliers. Characteristics of Participants With Outstanding Organization 0 0 lower shares of assets in equity funds and balanced than $100,000 (chart 5). funds alone, regardless of the investment options pre- directed by the participant. clients. Only plans in which at least 90 percent of all plan assets could be >$60,000–$80,000 Participants in these plans 46.5 6.7 company stock and 59 percent of the 11 percent of account balances that is in 1.6 0.6 18.3 25.8 balance also should be positively correlated as long-term age group, average account balances increase with funds, compared with 15 percent of participants earning such, does not necessarily represent the total number of Asset 0% Average Loan Balances financial markets and on the allocation of assets in the 0 privileges. In the 2000 EBRI/ICI database, 83 percent of 1 large relative to existing account balances and more than offset investment returns. Chart 6, Age Composition of Selected Account Balance >20–30 65.1 <100 100–500 0 501–1,000 the 2000 EBRI/ 1,001–5,000 >5,000 likely reflects the influence of two competing forces. Benefit Research Institute (February 2001). identified were included in the final EBRI/ICI databases. accounts in both 1999 and 2000 declined only 0.1 per- < $10,000 $10,000 This update extends previous findings from the project for 1996, 1997, 1998, balanced funds. Chart 24, Loan Balances as a Percentage of Account >$80,000–$100,000 >$20,000 >$30,000 49.9 >$40,000 6.0 >$50,000 Name from the EBRI/ICI database indicate that 401(k) plan 1.8 >$60,000 >$70,000 0.6 >$80,000 18.0 >$90,000 23.2 > $100,000 appear to be related to the number of participants in the 0 0 >$90,000 use the loan provision than other participants (chart 16). allocation to equity funds. Loans ..................................................................... <$10,000 $10,000 Participants in plans that >$20,000 >$30,000 >$40,00019 >$50,000Plan Loans funds. Participants in plans with employer-directed cent of their accounts in these assets. Allocations made >$60,000 The variation in account balances partly reflects >$70,000 >$80,000 >$100,000 All Account employees have had more time to accumulate an account sented. tend to invest a higher percentage of their self-directed Participant asset allocation appears to vary with plan in excess of $100,000 a year. Relationship of Database Plans to the Address tenure. For example, the average account balance of 0–2 >2–5 >5–10 >10–20 >20–30 >30 All individual’s account; and withdrawals, borrowing, and employees at the sponsoring firm. Distribution of Equity Fund Allocations Participants Participants Participants Participants Participants > 30 63.9 –$20,000 0 –$30,000 –$40,000 –$50,000 –$60,000 and 1999. For year-end 1999 results, see Holden and VanDerhei (January participants are in plans offering loans. However, only –$70,000 –$80,000 –$90,000 All Plans –$100,000 >$100,000 47.1 5.5 1.8 0.6 –$100,000 17.8 26.5 –$20,000 1–100 –$30,000 Relative to contributions, investment returns are more significant for older partici- 101–250 –$40,000 251–500 –$50,000 501–1,000 –$60,0001,001– –$70,000 Categories, 2000 2,501– –$80,000 5,001– –$90,000 ........................................................ >10,001 Balances 16 12 20s 30s 40s 50s 60s ICI database All Ages Holden, Sarah, Jack VanDerhei and Carol Quick. “401(k) Empirical research suggests that higher earners tend to cent in 2000. The change in a participant’s account 0–2 >2–5 >5–10 participants in aggregate did not experience or make 28 >10–20 >20–30 >30 Tenures Balances for Participants With Loans by Plan 31 Asset Allocation of Employee and offer GICs as an investment option allocate a smaller plan among plans not offering company stock or GICs The latest U.S. Department of Labor (forthcoming) estimate of the universe Among participants with outstanding loans at the end of On average, asset allocation of participants missing salary information is Participants earning between $40,001 and $100,000 are Average Loan Balances When GICs, but not company stock, are offered ............................................. 20 contributions have 76 percent of their participant- to company stock show a more mixed pattern by age. the effects of participant age, tenure, contribution Organization balances in company stock than participants in plans size, but much of the variation can be explained by All 59.4 balance. The participant’s tenure with the employer participants in their 60s with two or fewer years of 2001 and February 2001). Participants with no equity fund balances may loan repayments. Investment options are grouped into nine 2,500 5,000 10,000 Years of Tenure City/State/ZIP All 0–2 >2–5 43.4 >5–10 5.6 >10–20 2.0 >20–30 1.7 >30 18.9 27.7 Universe of Plans Allocation Size of Account Balance 18 percent of those eligible for loans have loans outstand- Age 36 and Par of 401(k)-type plans is for plan-year 1998. For 1998, it reported 300,593 ticipant Exposur pants, and the average account balance among participants in their 60s fell almost e to Equities • Chart 7, Tenure Composition of Selected Account Despite the volatility in financial markets, there was similar to the asset allocation for those with such information, in aggregate. 39 have three- Size of Account Balance balance is comprised of contributions, investment Years of Tenure contribute higher percentages of salary; Plan Asset Allocation, Account Balances, and Loan Size, 2000 ................................................................... therefore, one 23 2000, the average unpaid balance is $6,856. significant changes to their 401(k) accounts during 2000. Loan more likely to have a loan outstanding than those share of their assets to bond and money funds than the (but generally offering equity funds, balanced funds, Participants in their 20s have 15 percent of their plan Bibliography................................................................... 9 24 directed balances invested in equity securities (defined behavior, rollovers from other plans, asset allocation, serves as a proxy for length of participation in the 401(k) as an investment option, higher income participants tend without an employer-directed contribution. Company 2 differences in the investment options offered by plan Number of Ptenure is $16,132, compared with $177,289 for partici- articip Address Employer Contributions still have exposure to the stock market through company ants in Plan categories. Equity funds consist of pooled investments Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data 401(k)-type plans covering 37 million active participants, with $1,541 billion A sense of the relation among the three compo- The Employee Benefit Research Institute is a nonprofit, nonpartisan, public Source: Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, Tabulations From EBRI/ICI Participant-Directed Retirement Plan Years of Tenure Your Name ing at year-end 2000 (chart 15). Source: Tabulations From EBRI/ICI Participant-Directed Retirement Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 6 percent in 2000. virtually no change in loan behavior of 401(k) plan 29 Balance Categories, 2000.......................................... 16 quarters of plan would expect the ratio of account balance to salary to rise Activity in 1998.” returns, withdrawals, borrowing, and loan repay- Source: Tabulations From EBRI/ICI P ICI Perspective, Vol. 6, no. 1 (Invest- articipant-Directed Retirement Plan Data Collection Project. A wide range of average account balances is reported for 401(k)-type plans. 32 balance as a percentage of account balance (net of the Collection Project. The principal findings of the analysis are as bond funds, and money funds), or among plans offering Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. earning more or less (chart 17). Furthermore, only Endnotes base group, and lower their allocation to equity funds, as in assets. Data Collection Project. ........................................................................ 24 as company stock, equity funds, and the equity portion of policy research organization that does not lobby or take positions on legislative withdrawals, loan activity, and employer contribution balances in company stock, while participants in their plan. to allocate a lower percentage of their account balances stock represents 33 percent of the participant-directed Cerulli Associates. Among participants in the 2000 EBRI/ICI sponsors. For example, the percentage of plan assets stock or balanced funds. Indeed, 59 percent of partici- The 2000 EBRI/ICI database appears to be a representa- Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. pants in their 60s with more than 30 years of tenure nents is evident in the change in average account Among individual participants, the allocation of account primarily investing in stocks. These funds include equity Note: Minor investment options are not shown; therefore, row percentages will not add to 100 percent. City/State/ZIP Plan Data Collection Project. Source: Tabulations From EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Source: Tabulations From EBRI/ICI ParticipEmplo ant-Directed Retirement Plan Data Collection Project. yee Benefit R Data for the universe of 401(k)-type plans compiled by the Department of esear Loan activity varies with age, tenure, salary, ch Institute Note: Percentages may not add to 100 percent due to rounding. balances invested directly or indirectly in equity securi- 20 proposals. participants in 2000. Only 18 percent of eligible ment Company Institute, January 2000); and ments. EBRI follows: Typically, in a 401(k) plan, an employee contributes a well. both GICs and company stock (table 5, second and fifth 13 Alternatively, participants in plans that offer unpaid loan balance) for participants with loans is to GICS (table 10, second panel). However, when both 11 percent of participants with account balances of less balanced funds). Similarly, participants in plans without rates. Information in the EBRI/ICI database can be used 40s have 20 percent, and participants in their 60s have account balances in plans with employer-directed invested in equity funds tends to fall as plan size in- tive sample of the estimated universe of 401(k) plans. database, there is a positive correlation between account For comparison of the EBRI/ICI database with other participant-level (chart 8). Similarly, the average account balance of pants with no equity funds have investments in either Labor from the Form 5500 for 1998 imply an average account balance balances by age group. In the group of 8.3 million balances to equity funds varies widely around the mutual funds, bank collective trusts, life insurance 2121 K Street, NW Suite 600 Washington, DC 20037 Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 phone (202) 659-0670 Fax (202) 775-6312 or Fax to: (202) 775-6312 or Fax to: (202) 775-6312 www.ebri.org EBRI Issue Brief Number 239 • November 2001 • © 2001. EBRI 26 14 24 8 6 20 16 10 18 28 22 4 2 12 November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief November 2001 • EBRI Issue Brief 17 23 27 11 13 25 21 15 19 7 3 1 9 5 Issue Brief Issue Brief The premier organization Amount Amount

Volume 239

Pages 28

EBRI Issue Brief

Sarah Holden

Jack VanDerhei

Retirement