PSCA: More than two-thirds of DC plans offer target-date funds

Target-date funds were offered by 68.6% of defined contribution plans in 2011, up from 63.6% a year earlier and 33.4% in 2006, according to an annual Plan Sponsor Council of America survey.

“The popularity of target-date funds is continuing,” Robert A. Benish, executive director and COO of PSCA, said in an interview. “They are emerging as a best practice” for DC plans thanks to their “diversification and ease of use.”

The PSCA survey found that the largest plans — those with at least 5,000 participants — had the highest rate of offering target-date funds at 74.8%. The smallest plans — those with fewer than 50 participants —had the lowest offering rate at 58%.

Among other results in the PSCA survey:

  • The percentage of eligible participants making contributions to their plans was 79.5% last year vs. 76.9% in 2010. The percentage of eligible participants with an account balance remained flat, 85.9% last year vs. 86.3% in 2010.
  • Among plans with match provisions, 93.3% made matches in 2011 vs. 89% in 2010.
  • The percentage of plans using auto enrollment rose to 45.9% from 41.8% in 2010.
  • Just more than half (53.9%) the plans had default deferral rates of 3% of participants' pay last year, while 14% had rates below 3% and 32.3% had rates above 3%.
  • The percentage of plans offering investment advice stayed flat at 57.8% last year vs. 57.6% in 2010, while the percentage of plans offering professionally managed accounts also remained flat — 33.9% in 2011 vs. 34.2% in 2010.

Executives from 840 profit-sharing and 401(k) plans responded to the PSCA survey via mail and online questionnaires from March through July.