Top-Performing 401(k) Plans Promote Participation & Receive Generous Employer Contributions, ALM Study Finds
Benchmarking Report Provides Crucial Intelligence for Financial Advisors to Help 401(k) Plan Sponsors Navigate Changing Regulatory Environment
New York, NY—April 20, 2016—ALM’s Judy Diamond Associates announced today that it has published the results of its first annual 401(k) Plan Benchmarking Report. This comprehensive look at the U.S. 401(k) market examines the performance of nearly half a million employer-sponsored retirement plans, and concludes that “micro” 401(k) plans with between one and 10 participants tend to have the highest average account balances, participation rates, and employer contributions.
The study also found that the rate of return of a typical 401(k) plan does not vary significantly by either industry or the size of the employer. This suggests that the quality of investment options is not a critical variable in comparing the performance of different plans. Employer-sponsored plans that set their participants up for a strong and stable retirement encourage employee participation through matching contributions and educational programs about the benefits of saving for retirement. New automatic enrollment rules have also been a boon to overall participation rates.
Judy Diamond Associates examined 480,000 active 401(k) plans from across 22 industries. Each plan studied had at least one active participant and more than $3,000 in total plan assets. Data used in the study comes from the 2014 plan year, the most recent year for which information is available. Each plan was evaluated using eight metrics of performance, and the entire study sample covers approximately 52 million workers and more than $4 trillion in assets. To obtain a copy of the study, visit http://www.judydiamond.com.
Among its findings, the study reveals a tremendous disparity in the quality of 401(k) plans between “white-collar” industries and their “blue-collar” counterparts. For example, the average account balance for an employee at a small CPA firm was $115,000, whereas the average account balance for a worker in the educational services sector was only $41,000.
“Our research demonstrates that there are meaningful differences in the amount of retirement income a worker can expect to earn based on their industry,” said Eric Ryles, Managing Director of Judy Diamond Associates. “It’s not surprising that there is a gap between dentists and hospitality workers. What’s surprising is the enormity of that gap—over the span of an entire career, the difference at retirement amounts to hundreds of thousands, if not millions of dollars. In light of the Department of Labor’s new fiduciary regulations and the ongoing emphasis on retirement-saving, financial advisors can use the findings in this performance-based benchmarking study to help plan sponsors understand the importance of maintaining a strong and competitive 401(k) package.”
Judy Diamond Associates is part of ALM Intelligence, which offers data analytics, research and insights that empower ALM’s customers to make better strategic decisions and anticipate competitive moves in their markets. The division’s database products and intelligence reports serve professionals in the consulting, finance, insurance, and legal industries.
“Judy Diamond Associates’ first benchmarking study is part of our ongoing initiative to expand ALM Intelligence’s tools and offerings across all ALM industry verticals,” said Andrew Neblett, President of ALM Intelligence. “Advisors that harness these findings can empower 401(k) plan sponsors across the nation to help their participants save more money for retirement, and this is an example of the significant impact ALM Intelligence can have within and beyond the complex industries we serve.”
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