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Participant Deferral Rate Rose Slightly

How does your plan compare?

The average participation rate in 401(k) plans was 88% at the end of 2012, according to the 56th Annual Survey of Profit Sharing and 401(k) Plans by the Plan Sponsor Council of America (PSCA). (The rate is defined as the average percentage of eligible employees who had a balance in the plan.) The year before, the rate was 86%. An average of nearly 81% of eligible employees made contributions to the plan in 2012.

The average participant pre-tax deferral rate was 6.8%, compared to 6.4% the year before.

Fast eligibility continued

About 62% of companies permit employees to contribute to the plan immediately upon hire. Almost half (46%) grant immediate eligibility to receive the company match, while 29% require one year of service.

Auto-enrollment remained popular

Over 47% of plans had an automatic enrollment feature.

The most common default deferral rate was 3% of pay (52% of plans). More than 35% of plans reported a default deferral rate greater than 3%.

Target retirement date funds remained the most common default investment option (73% of plans).

About 58% of plans with automatic enrollment also provide for automatic increases in contribution rates over time.

Roth feature usage rose

About 54% of plans permitted Roth 401(k) contributions, up from 49% the previous year. Of those eligible to make Roth contributions, 20% did so. Based on ADP test results, the average Roth deferral rate of lower-paid participants was 4.0%. For higher-paid participants, the average was 4.9%.

Number of options did not change

The average number of investment choices offered to participants remained at 19.

Other survey results included:

  • More than 89% of plans had an investment policy statement. Monitoring of investments occurred most often on a quarterly basis (67% of plans).
  • Immediate vesting of matching contributions was reported by 41% of plans.
  • More than 18% of plans offered company stock as an investment option.
  • Almost 88% of plans allowed hardship withdrawals, and about 2% of participants had such a distribution in 2012.
  • Loans were permitted in 88% of plans. More than half of these plans (51%) allow only one loan at a time.
  • Rollovers were accepted in nearly 98% of plans. Nearly two-thirds of plans required employees to be eligible to make elective deferrals before they could roll over assets into the plan.
  • Catch-up contributions were permitted in nearly 98% of plans. About 24% of those eligible for these contributions made catch-up contributions.

The survey reflects the 2012 experience of 10.3 million participants in 686 plans that had a total of more than $769 billion in plan assets.

The survey may be purchased from the PSCA at

For Plan Sponsor Use Only- Not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., P.O. Box 1456, Tualatin, OR 97062; 877-306-5055;

© 2014 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law, or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.