September 2015

Inside this issue:


Comparing your plan to others’ can be an enlightening and useful experience. Each year you have that opportunity by reviewing the data in a popular industry survey. For example, the average participation rate in 401(k) plans was 89% at the end of 2013.* (The rate is defined as the average percentage of eligible employees who had a balance in the plan.) The rate the year before was 88%. An average of nearly 80% of eligible employees made contributions to the plan in 2013.

The average participant pretax deferral rate was 6.7%, compared to 6.8% the year before.

Fast eligibility continued
About 64% of companies permit employees to contribute to the plan immediately upon hire. Almost two-thirds (58%) grant immediate eligibility to receive the company match, while 30% require one year of service.

Auto-enrollment remained popular
About 50% of plans had an automatic enrollment feature.

The most common default deferral rate was 3% of pay (47% of plans). More than 40% of plans reported a default deferral rate greater than 3%.

Target retirement date funds remained the most common default investment option (72% of plans).

About 65% of plans with automatic enrollment also provide for automatic increases in contribution rates over time.

Roth feature usage rose
About 58% of plans permitted Roth contributions, up from 54% the previous year. Based on ADP test results, the average Roth deferral rate of lower-paid participants was 3%. For higher-paid participants, the average was 2.6%.

Number of investment options was unchanged
The average number of investment choices offered to participants remained 19.

Other survey results

  • More than 87% of plans had an investment policy statement. Monitoring of investments was done most often on a quarterly basis (67% of plans).
  • Immediate vesting of matching contributions was reported by 38% of plans.
  • A little over 19% of plans offered company stock as an investment option.
  • Almost 86% of plans allowed hardship withdrawals, and about 2% of participants had such a distribution in 2013.
  • Loans were permitted in 89% of plans. More than half of these plans (52%) allow only one loan at a time. The average loan balance was $10,385.
  • Rollovers were accepted in nearly 98% of plans. Nearly two-thirds of plans (59%) require employees to be eligible to make elective deferrals before they can roll over assets into the plan.
  • Catch-up contributions were permitted in 97% of plans. About 25% of those eligible for these contributions made catch-up contributions.

The survey results reflect the 2013 experience of 8 million participants in 613 plans that had a total of more than $832 billion in plan assets.

The survey may be purchased from the PSCA at

* 57th Annual Survey of Profit Sharing and 401(k) Plans by the Plan Sponsor Council of America (PSCA), published December 3, 2014.

Kmotion, Inc.


The economic recovery continues. Backing up that statement is the Investment Company Institute (ICI) report on the retirement assets of U.S. investors. Since the end of 2013, retirement assets increased by 6%, reaching $24.7 trillion as of December 31, 2014.

The majority of retirement assets in the U.S. are held in Individual Retirement Accounts, at $7.4 trillion. Nearly the same amount, $6.8 trillion, was held in defined contribution plans. Government defined benefit plans—those of federal, state and local governments—held $5.2 trillion in assets at the end of 2014, and private sector defined benefit plans held $3.2 trillion. Annuity reserves outside of retirement accounts held another $2 trillion on December 31, 2014.

Of the $6.8 trillion held in defined contribution plans, $4.6 trillion was in 401(k) plans, according to ICI’s report. Most (55%) of the assets held in defined contribution plans were invested in mutual funds.

© 2015 Kmotion, Inc.


When it comes to plan-related document storage remember that your primary goal should be to preserve materials in a format allowing for quick and easy retrieval. It’s appropriate to store plan records electronically whenever possible. Also, be sure to retain an executed copy (or countersigned copy, as applicable) of each record and not the unsigned original that may have been sent to you for signature. While most providers can provide reports and current plan documents, the plan administrator remains ultimately responsible for retaining adequate records that support the plan document reports and filings.

Documentation Retention Requirement for Audit Purposes*
Plan Documents (including Basic Plan Document, Adoption Agreement, Amendments, Summary Plan Descriptions, and Summary of Material Modifications) At least six years following plan termination
Annual Filings (including 5500, Summary Annual Reports, plan audits, distribution records and supporting materials for contributions and testing) At least six years
Participant Records (including enrollment, beneficiary, and distribution forms; QDROs) At least six years after the participant’s termination
Loan Records At least six years after the loan is paid off
Retirement / Investment Committee meeting materials and notes At least six years following plan termination

*For litigation purposes, we recommend that documents be retained indefinitely.

If you have questions, contact your plan consultant.



Employees take a lot of loans from our plan, and we worry that their retirement prospects will be affected. Is there research to support (or refute) our concerns?

A: There has been a lot written about plan leakage, which is when invested assets leave 401(k) plans to go elsewhere, usually to fund consumption of some kind. Plan leakage usually refers to loans, withdrawals when people change jobs, hardship withdrawals, and the like. The concern with the removal of any money invested in a plan is the cumulative impact of the withdrawal due to compounding over time.

In a blog post for MarketWatch, well-known economist Alicia H. Munnell says that in order to accumulate enough money for retirement, employees need to not only save but also leave their savings invested for the long term.

Munnell writes that Vanguard’s report “How America Saves” has quantified data about plan leakage, allowing researchers like her to understand how much money is withdrawn from 401(k) plans and where the money is going. The report found that the percentage of assets leaving 401(k) plans due to loans and other forms of leakage was 1.2%. Munnell says that although this appears to be a very small number, its impact can be substantial for individual participants. Balances at retirement, she says, are almost 20% smaller than they would have been in the absence of leakage, although loans seem to play a minor role.

Read more of Munnell’s thoughts on plan leakage at

No strategy assures a profit or protect against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

For Plan Sponsor use only Not for use with Participants or the General Public.This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. 

Montgomery Retirement Plan Advisors does not warrant and is not responsible for errors or omissions in the content of this newsletter.

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