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January 14, 2014
TO: BANK, TRUST AND RETIREMENT ADVISORY COMMITTEE No. 3-14 RE: INSTITUTE PUBLISHES YEAR-END 2012 EBRI/ICI 401(K) PLAN UPDATE
In December 2013, the Employee Benefit Research Institute (EBRI) and ICI published the annual EBRI/ICI 401(k) database update for year-end 2012. The update reported on the year-end 2012 401(k) account balances for 24.0 million 401(k) plan participants in 64,619 plans holding $1.536 trillion in assets. The research also analyzed the asset allocation of 401(k) plan participant accounts, including the role of equity investing and target date funds. Finally, loan activity among 401(k) participants was explored.
Key takeaways from the research include:
- 401(k) account balances vary with participant age and tenure. Older participants and those with longer tenure tend to have higher 401(k) balances at their current employers. For example, at year-end 2012, the average account balance among 401(k) plan participants in their sixties with more than 30 years of tenure was $224,287.
- Equity investing plays an important role in 401(k) plans. At year-end 2012, 61 percent of 401(k) plan participants’ accounts were invested in equities—through equity funds, the equity portion of target date funds, the equity portion of non–target date balanced funds, and company stock. The report shows younger 401(k) plan participants had higher concentrations in equities—nearly three-quarters of 401(k) assets among participants in their twenties or thirties—compared with older participants. Participants in their sixties had less than half of their 401(k) assets invested in equities.
- The role of target date funds in 401(k) plans continued to grow. At year-end 2012, 41 percent of 401(k) participants held target date funds (funds include mutual funds, collective trusts, and separate accounts). The 41 percent of 401(k) participants who held target date funds at year-end 2012 represents an increase from 39 percent in 2011 and 19 percent in 2006. In addition, 15 percent of the assets in the EBRI/ICI 401(k) database were invested in target date funds at year-end 2012, up from 13 percent in 2011 and 5 percent in 2006.
- 401(k) loan activity in 2012 remained in line with the past few years. At year-end 2012, 21 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, unchanged from the prior three years (2009−2011), although slightly elevated compared with prior to the financial crisis (2006−2008). Loans outstanding amounted to 13 percent of the remaining account balance, on average, at year-end 2012, down 1 percentage point from year-end 2011. Nevertheless, loan amounts outstanding increased slightly from the previous year.
The ICI news release is available at www.ici.org/pressroom/news/13_news_ebri_ici_target and the complete data analysis, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2012,” ICI Research Perspective, is available at www.ici.org/pdf/per19-12.pdf.
If you have any questions or comments concerning this research, please call me at (202) 326-5915 or email me at sholden@ici.org.
Sarah Holden
Senior Director, Retirement & Investor Research