In its continuing effort to figure out what makes defined contribution plan participants tick, J.P. Morgan Asset Management has turned its attention to defaults.
A new J.P. Morgan survey compared DC participants who moved into target-date funds by default in a plan's QDIA vs. a broader swath of target-date participants in DC plans.
“Three key differences stand out” between the default group and the broader group of target-date fund participants, said Anne Lester, a J.P. Morgan managing partner and co-author of the survey, which was based on a review of a J.P. Morgan Retirement Plan Services' database of 1.7 million participants from 2006 through 2008.
“Defaulted participants save less than regular population,” she said in an e-mail response to questions. “Defaulted participants take fewer and smaller loans than the broad population (and) defaulted participants take fewer distributions between 59½ and retirement.”
Default participants' average annual contribution rates started at 5%, reached 8% by age 50 and hit 10% by age 65, the survey said. For the other group, the average contribution rate started at 5.8%, reached 8% by age 42 and achieved 10% by age 55, the survey said. — Robert Steyer