CHICAGO -- Close to 40% of plan sponsors offer 10 or more funds for participant contributions, up from 30.6% in 1997, according to a study conducted by the Profit Sharing/401(k) Council of America.
There also was an increase in the average number of fund options to 9.6 from 8.6 investments the year before, said David Wray, PSCA president.
"Every year for the last 15 years, the average number of funds has steadily increased," Mr. Wray said. "It started with two options: company stock and stable value."
The survey of the 1998 plan year is PSCA's 42nd annual survey of profit-sharing and 401(k) plans and covers 660 plans with more than $196 billion in plan assets.
Some 18.9% of all plans offer company stock investment options, up slightly from the 18.4% of companies that offered them last year for participant contributions, the survey stated.
Once again, the larger the plan, the more likely it is to include company stock as an option. However, the number of large plans that offer company stock as an investment option has dipped somewhat from the previous survey. About 61% of companies with more than 5,000 participants offered a company stock fund for participant contributions, down from 65.6% the year before. And 28% of companies with between 1,000 and 4,999 participants offer company stock, down a bit from 33%, the data revealed.
And while company stock once again attracted more plan assets than any other investment option, a tad more money was invested in the company stock fund. For example, 49.1% of assets in plans with more than 5,000 participants were invested in company stock, compared with 48.6% in the previous survey. About 47% of large companies with company stock investment options had between 10% and 50% of plan assets invested in company stock, up from 45% the year before and 44% in 1988, the survey indicated.
At the same time, the median return for company stock dropped to 10%, down from 22.1% in the 1997 survey, the results reveal.
In general more plan assets are going into equities, with more than 70% in stocks, Mr. Wray noted. This will continue until the performance of stable-value outstrips that of equities, he said. The median rate of return for stable value dipped to 6.1%, from 6.2% the year before, survey results indicated.
"Young people are heavily into equities. They're putting the pedal to the metal. They're the risk-takers," Mr. Wray said.
On the other hand, the behavior of the parents of baby boomers and of boomers themselves has been affected by the older generation's experiences during the Great Depression, he explained.
"Older people now were children during the Depression, when equities became an anathema," Mr. Wray said. "They transferred their fear to the boomers."
The result is that neither the baby boomers nor their parents invest much of their retirement dollars in equities, he said.
More plans are just beginning to include self-managed accounts in their 401(k) and profit-sharing plans, the survey stated. About 10% of companies with more than 5,000 plan participants have self-managed accounts or unrestricted windows. In the previous survey only 4.9% of large plans included such options. However, less than 1% of the plan assets are being directed into those options.
Also, each year more company money is being directed by participants, Mr. Wray said. According to this year's survey, 94.4% of participants direct their own contributions and 76.8% direct company contributions. These figures are up slightly from the previous survey, when 93.8% of plan participants directed their own contributions and 76.7% directed company money.
And 15% of plans permit participants with less than $5,000 in their accounts to leave their money in their companies' plans when they leave, the survey indicated. There is no comparison number because this is the first time this question has been asked.
