Defined contribution plans are increasing their use of automatic features and raising initial deferral rates, according to a survey released Tuesday by the Plan Sponsor Council of America.
PSCA reported 59.7% of plans offered auto enrollment in 2016, the last year data were available. That represents an improvement from the 57.5% in 2015, and continues a steady string of annual increases since 38.4% of plans offered auto enrollment in 2009.
The greater use of auto features was the most noticeable result from the annual survey, which covers multiple areas of plan management, design and investing, Hattie Greenan, director of research and communications, said in an interview.
The greater use of auto enrollment was accompanied by a greater use of auto escalation. Among plans offering auto enrollment, 73.4% also offered auto escalation in 2016, up from 68.3% in 2015. In annual PSCA surveys, there's been a steady increase in plan usage of auto escalation since 2011, when 55.2% offered this feature.
The PSCA survey also found more DC plans are setting their initial auto enrollment default rates at more than 3%, historically the most common rate set by plan executives. In 2016, the PSCA survey found 53.5% of plans exceeded the 3% level vs. 51.6% in 2015. Those two years represent quantum leaps from previous years. The previous high level was 40.4% in 2014.
The top average asset allocations for DC plans in the survey were: active domestic equity funds (22.9%); target-date funds (22.2%); passive domestic equity funds (13.5%); stable value funds (8.1%) and balanced funds (4.3%).
The survey covered 590 profit-sharing and 401(k) plans, of which 19.2% had 5,000 or more participants and 18.5% had 1,000 to 4,999 participants.