ICI Finds Minimal 401(k) Account Changes in 1st Quarter

By Ted Godbout • September 15, 2017 • 0 Comments

As stock values generally rose during the first quarter of the year, most deferred compensation plan participants continued with their asset allocations and contribution levels, and maintained low withdrawal activity, according to the Investment Company Institute (ICI).

A recent ICI study, “DC Plan Participants’ Activities, First Quarter 2017,” tracks contributions, withdrawals and other activity based on DC plan recordkeeper data covering more than 30 million employer-based DC retirement plan participant accounts as of March 2017.

The study found that reallocation activity was generally in line with the same time frame in previous years, with 4.6% of DC plan participants changing the asset allocation of their account balances in the first quarter of 2017, compared with 4.3% in the first quarter of 2016.

As to asset allocation of contributions, the report shows a smaller change from the previous year, with 3.8% of participants changing their allocation in the first quarter of 2017, compared with 5.2% for the same period in 2016.

The report notes that the withdrawal and contribution data indicate that “essentially all DC plan participants continued to save in their retirement plans at work.” Contribution activity shows that only 1.1% of DC plan participants stopped contributing in the first quarter of 2017, which was the same pace as in the first quarter of 2016 — and nearly identical going back to the same period in 2010.

Withdrawal activity also remained low for the quarter and was similar to the previous year. Only 1.3% of plan participants took withdrawals in the first quarter of 2017, which was about the same as in the first quarter of 2016, the report notes. In addition, the levels of hardship withdrawal activity also remained low for plan participants and was essentially identical for the first quarter of both 2017 and 2016 at 0.4%.

Finally, DC plan participants’ loan activity edged down in the first quarter of 2017. ICI notes that this follows an observed seasonal pattern where the first quarter tends to have lower percentages of plan participants with loans outstanding compared with later quarters. The data shows that at the end of March 2017, 16.6% of DC plan participants had loans outstanding, compared to 17% at year-end 2016. The report points out that loan activity continues to remain elevated compared with year-end 2008, when 15.3% of participants had loans outstanding.