As of December 31, 2018
After several years of record-breaking plan and participant outcomes, 2018’s market turbulence may have contributed to a rise in concerning participant behavior. But strategic plan design continued to produce strong plan and participant outcomes despite the uncertainty, resulting in 2018 being a year of mixed results.
pretax deferral rate
- Increasing default deferral rates
- Opt-out option for auto-increase
- Targeted messaging to participants
Plan design continues to drive positive outcomes for participants:
- Participation rates were nearly 96% higher for plans with autoenrollment, and usage of auto-increase was nearly five times higher in plans that employ the opt-out option.
- Nearly 37% of auto-enrollment plans have a default deferral rate of 6% or higher compared with nearly 33% at a 3% default.
- Employer match rates generally increased in 2018, and the 4% top effective match rate surpassed the 3% rate for the first time.
- Participants who saved less in 2018 decreased their deferral rates by a greater amount than those who increased their deferral rates.
- Loan usage reached a six-year low, while hardship withdrawals fell for the ninth year in a row.
in cash-out distributions
- Uncertainty about the markets
- Increased distributions of small account balances
But turbulence contributed to reduced outcomes in several areas:
- The participant-weighted participation rate dropped by nearly 2% from 2017 to 2018.
- The percentage of participants contributing 0% increased to 36%.
- Average account balances decreased by almost 8%, in part because of year-end market declines.
- Late in the year, participants moved money from stocks to more conservative investments, presumably due to market activity.
This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. This material does not provide fiduciary recommendations concerning investments or investment management; it is not individualized to the needs of any specific benefit plan or retirement investor, nor is it directed to any recipient in connection with a specific investment or investment management decision.T. Rowe Price Retirement Plan Services, Inc.