Employees' 401(k) plan participation rates, plan balances and diversification efforts have improved only slightly over the last two years, according to a new Hewitt Associates study. The rate of participation in 401(k) plans during 2004 increased to 70.3%, up 2.1% from 2002. The average account balance last year was $69,000, up from $64,000 in 2002, but 23% of participants had balances of less than $5,000 in 2004. Also, only 46% of workers under age 30 participate in a company-sponsored 401(k) plan.
"What we've found out is that non-participants and low savers are a very hard group to reach," Lori Lucas, director of participant research at Hewitt, said in an interview. "They need additional assistance besides traditional education."
The study also found that 40% of employees invest in lifestyle fund options if they're offered, about the same as in 2002. But only 15% of those in lifestyle funds have all of their non-company stock balances invested in a single lifestyle fund, so they are not using them as intended.
On average, 27% of participants' total 401(k) balances were in company stock last year, about the same as 2002 — still the single largest holding, according to the study.
The study examined the saving and investment behavior of more than 2.5 million employees eligible for 401(k) plans in 2004.