DC Plan Participants Hold Steady on Asset Allocations

By Ted Godbout • August 30, 2018 • 0 Comments
Americans continued to save for retirement through their DC plans, with most maintaining their assets allocations even as stock values edged down during the early part of the year.

In the first quarter of 2018, 5.1% of DC plan participants changed the asset allocation of their account balances, compared with 4.6% in the first quarter of 2017, according to data from ICI’s “Defined Contribution Plan Participants’ Activities, First Quarter 2018.”

Meanwhile, only 3.5% of participants changed the asset allocation of their contributions, compared with 3.8% in the first quarter of 2017. These levels were similar to the activity observed in the same time frame in recent years, the report notes.

ICI’s study tracks contributions, withdrawals, and other activity, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans.

The data also indicates that plan participants remain committed to saving and investing, as nearly all continued contributing to their plans in the first quarter of 2018 — only 1.1% of DC plan participants stopped contributing during this period. It’s possible some participants stopped contributing simply because they reached the annual contribution limit, the report observes.

Withdrawal and Loan Activity

Withdrawal activity for DC plans also remained low in the first quarter of 2018, with only 1.3% of DC plan participants taking withdrawals, the same share as in the first quarter of 2017. Hardship withdrawal activity was also low, with only 0.5% of DC plan participants taking a hardship withdrawal during the first quarter of 2018, which is about the same level as the first quarter of 2017.

DC plan participants’ loan activity also edged down, apparently following a seasonal pattern observed over the past several years. The report explains that the first quarter of the year tends to have lower percentages of DC plan participants with loans outstanding compared with later quarters. Accordingly, at the end of March 2018, 16.4% of DC plan participants had loans outstanding, compared with 16.7% at the end of 2017.