The average amount of assets allocated to target-date funds in 401(k) and profit-sharing plans grew to 13% of total defined contribution assets last year, up from 10% in 2009 and 2.6% in 2006, according to a survey by the Plan Sponsor Council of America, Chicago.
“That’s a big jump,” David Wray, the PSCA president, said in an interview. “That’s a significant change in allocation.” Mr. Wray said the percentage of DC plans offering of target-date fund options climbed to 63.6% vs. 62.3% in 2009 and 33.4% in 2006.
The 54th annual survey by PSCA, issued Tuesday, covered 820 plans with more than $691 billion in assets and 10.5 million participants.
Mr. Wray said the average number of investment options was 18 in 2010 among plans surveyed, the same as in the previous year. “The momentum toward offering more choices has stopped,” he said, predicting that the average number of options will gradually decline.
According to a PSCA news release, the survey also reported that:
• Equities represented about 63% of the average plan’s assets.
• The most popular investment options, measured by assets, were actively managed domestic equity funds (25.1% of total plan assets), target-date funds (13%), stable value funds (9.9%), domestic equity index funds (8.8%) and actively managed international equity funds (8.4%).
• Automatic enrollment was available in 41.8% of the plans. Among plans with auto enrollment, 82.3% offered this feature only to new employees.
• The most common default deferral was 3% of pay, and the most common default investment option was a target-date fund.
• Investment advice was offered by 57.6% of plans, but only 22.3% of participants used advice when it was offered.
