[10663]
January 21, 1999
TO: DIRECT MARKETING COMMITTEE No. 3-99
INDUSTRY STATISTICS COMMITTEE No. 1-99
PENSION COMMITTEE No. 3-99
PENSION OPERATIONS ADVISORY COMMITTEE No. 5-99
RESEARCH COMMITTEE No. 2-99
SALES FORCE MARKETING COMMITTEE No. 3-99
SHAREHOLDER COMMUNICATIONS COMMITTEE No. 1-99
RE: PUBLISHED PERSPECTIVE
______________________________________________________________________________
The enclosed copy of Perspective, entitled "401(k) Plan Asset Allocation, Account Balances,
and Loan Activity," is the first research report from the Institute’s collaborative data collection
project with the Employee Benefit Research Institute (EBRI). EBRI also has published the
paper in its Issue Brief series.
The purpose of the collaboration is to build a database of participants in 401(k) plans that will
enable the Institute to address public policy issues about 401(k) plans and their contribution
to retirement security. The EBRI/ICI 401(k) database is by far the most comprehensive source
of participant data and consequently is the best source of information for policy analysis.
The research report uses data for 1996 that includes an estimated 31 percent of all assets in
401(k) plans, 18 percent of all participants, and 9 percent of all plans. The 1996 data are
representative of the universe of 401(k) plans and participants. Data for 1997 are currently
being collected and processed, and data for 1998 will eventually be included in the database.
A significantly larger number of plans and participants will be in the 1997 and 1998 database.
The source of the data is ICI members and EBRI sponsors serving as plan administrators and
recordkeepers.
The first report contains a number of important and positive findings about asset allocation,
plan balances, and plan loans. On average, participants have invested about two-thirds of
plan balances in equity-related investments. The bulk of equity investment is in equity funds
(mutual funds, collective trusts, and separate accounts), but a significant proportion is in
company stock. Asset allocation varies with age, with younger workers holding a higher
share of equity investments than older workers.
Older participants with substantial service with their current employers have accumulated
significant account balances. For example, those participants in their sixties and with over
thirty years of service had an average balance of $156,000. The average balance for all
participants was $37,300; its lower level reflects a high proportion of young workers or
workers with low years of service.
Of those participants in 401(k) plans in which loans are available, only 18 percent had a loan
outstanding at the end of 1996. For those with a loan, the level of the unpaid balance was 16
percent of the account balance (net of the loan).
The report also reveals two concerns. Approximately 15 percent of all participants had no
exposure at all to equity-related investments. In addition, company stock accounted for 19
percent of holdings of all participants. In plans in which the employer made contributions in
company stock, the total allocation was 55 percent.
John Rea
Vice President
Research
Enclosure