how america saves small business edition...dc plans with employee-elective deferrals can be grouped...
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HOW A MERIC A S AV ES 2 018
Small business edition2018 Vanguard Retirement Plan Access™
supplement to How America Saves
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The Small Business Administration reports that small businesses represent 99.7% of all employer firms, and they employ half of all private-sector employees. Accordingly, to help small-business DC plan sponsors understand how their plans compare with other small-business plans, we are pleased to add this VRPA supplement to our annual series of How America Saves benchmarking reports. As an industry leader, Vanguard recognizes that it is important to have a detailed understanding of DC plans and the role they play in the U.S. retirement system. We believe this information can help you make more effective plan decisions and will serve as a valuable reference tool as you continue to develop your retirement programs.
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1 U.S. Department of Labor, Private Pension Plan Bulletin Historical Tables and Graphs, February 2018; and Investment Company Institute, Quarterly Retirement Market Data, Fourth Quarter 2017, April 2018.
IntroductionDefined contribution (DC) retirement plans are the centerpiece of the private-sector retirement system in the United States. More than 97 million Americans are covered by DC plans, with assets now in excess of $7.5 trillion.1 Vanguard is at the forefront in the DC marketplace with more than $1.2 trillion in DC plan assets under management, as of March 31, 2018. In our full-service DC recordkeeping business alone, we serve more than 10,800 plan sponsors and more than 4.9 million participants.
Launched in 2011, Vanguard Retirement Plan Access™ (VRPA) is a comprehensive service for retirement plans with up to $20-plus million in assets. Through VRPA, we served 8,900 plan sponsors with 370,000 participants as of year-end 2017.
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Figure 1. Population
Vanguard Retirement Plan Access defined contribution plans
2013 2014 2015 2016 2017
All All All All All Established Start-up
Number of plans 1,418 2,666 4,452 6,506 8,873 6,269 2,604
Number of participant accounts 61,746 125,136 199,242 273,045 370,414 303,217 67,197
Average number of plan participants
44
47
45
42
42
48
26
Median number of plan participants
20
21
20
19
19
24
11
Average plan assets $2.4 million $2.5 million $2.3 million $2.3 million $2.6 million $3.4 million $1.6 million
Average participant age 43 43 43 43 43 44 41
Median participant age 42 42 42 42 42 43 38
Average participant tenure 7 7 7 7 7 7 5
Median participant tenure 4 4 4 4 4 4 2
Median eligible employee income $53,000 $47,000 $47,000 $49,000 $48,000 $49,000 $46,000
Median participant income $67,000 $58,000 $59,000 $64,000 $63,000 $63,000 $64,000
Median nonparticipant income $35,000 $29,000 $30,000 $30,000 $28,000 $28,000 $27,000
Source: Vanguard, 2018.
The benchmark population
The benchmark population includes all plans and participants for which VRPA provides recordkeeping (Figure 1). Most figures in this analysis compare data for two distinct VRPA populations: established plans and start-up plans. Start-up plans are plans that were begun within the past three years. Established plans are plans that were started more than three years ago.
On average, VRPA plans had 42 participants and plan assets of $2.6 million. Established plans had twice as many participants than start-up plans. As expected, start-up plans had fewer assets than established plans.
Plan design
DC plans with employee-elective deferrals can be grouped into four categories based on the type of employer contributions made to the plan: (1) plans with matching contributions, (2) plans with nonmatching employer contributions, (3) plans with both matching and nonmatching contributions, and (4) plans with no employer contributions at all. Nonmatching contributions are typically structured as a variable or fixed profit-sharing contribution.
In employee-contributory DC plans, employer contributions are typically a secondary source of plan funding. Both the type and size of employer contributions vary substantially across plans.
EligibilityIn 2017, 1 in 5 (21%) VRPA plans allowed employees to make voluntary contributions immediately after they joined their employer (Figure 2). At the other extreme, 4 in 10 (42%) plan sponsors required eligible employees to have one year of service before they could make employee-elective contributions to their plans. Start-up plans were more likely to allow employees to make voluntary contributions immediately than established plans. Established plans were more likely to require employees to have one year of service before they could make employee-elective contributions to their plan.
Eligibility for employer-matching contributions was remarkably similar to eligibility for employee voluntary contributions. However, eligibility for nonmatching employer contributions had a longer waiting period. More than half of plans sponsors required a one-year waiting period for these contributions.
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Figure 2. Eligibility, 2017
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
21%
4%
19% 14%
<0.5%
42%
20%
4%
17% 13%
<0.5%
46%
25%
5%
23%
15%
1%
31%
0%
75%
Immediate 1 month 2–3 months 4–6 months 7–11 months 1 year
16%
3%
12% 12%
<0.5%
57%
14%
3%
11% 11%
<0.5%
61%
21%
3%
17% 14%
<0.5%
<0.5% <0.5% <0.5%
45%
0%
75%
Immediate 1 month 2–3 months 4–6 months 7–11 months 1 year
19%
4%
20% 17%
40%
18%
4%
18% 16%
44%
21%
4%
26%
18%
31%
0%
75%
Immediate 1 month 2–3 months 4–6 months 7–11 months 1 year
Employee-elective contributions
Employer-matching contributions
Employer nonmatching contribution
All Established Start-up
Source: Vanguard, 2018.
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VestingVoluntary employee contributions are immediately vested. Seven in 10 plan sponsors also immediately vested employer-matching contributions (Figure 3). Seven in 10 employers also immediately vested nonmatching employer contributions.
Employer contributionsForty-four percent of VRPA plans provided only a matching contribution in 2017 (Figure 4). Eight percent of plans provided both a matching and a nonmatching employer contribution. Twenty-three percent of plans provided only a nonmatching employer contribution. Finally, one-quarter of plans made no employer contributions of any kind in 2017.
Figure 3. Vesting
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
69%
<0.5% 2% 3% 1% 2% 3% 6%
14%
<0.5%
65%
1% 2% 3% 1% 2% 3% 7%
16%
<0.5%
78%
<0.5%
<0.5% <0.5% <0.5%
3% 2% 2% 3% 2% 3% 7%
<0.5%
<0.5% <0.5% 0%
Immediate 1-yr cliff 2-yr cliff 3-yr cliff 2-yr graded 3-yr graded 4-yr graded 5-yr graded 6-yr graded Other
Immediate 1-yr cliff 2-yr cliff 3-yr cliff 2-yr graded 3-yr graded 4-yr graded 5-yr graded 6-yr graded Other
73%
2% 2% <0.5% 1% 1% 3%
18%
70%
1% 2% 1% <0.5% 2% 4%
20%
82%
2% 1% <0.5% 1% <0.5% 3%
11%
90%
0%
90%
0%
Employer-matching contributions
Nonmatching employer contribution
All Established Start-up
Source: Vanguard, 2018.
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Safe harbor designsSeven in 10 (69%) VRPA plans with an employer contribution had adopted a safe harbor design (Figure 5). The most common was a safe harbor match with a value of 4% on up to the first 5% of employee contributions (39% of safe harbor plans).
Fourteen percent of VRPA plans provided a safe harbor match with a value greater than 4% on up to the first 6% of employee contributions. Nearly half of VRPA plans adopted a safe harbor nonelective employer contribution with a 3% value or higher.
Figure 4. Types of employer contributions, 2017
Vanguard Retirement Plan Access defined contribution plans
All Established Start-up
Matching contribution only 44% 44% 44%
Nonmatching contribution only 23 23 22
Both matching and other nonmatching contributions 8 10 5
75 77 71
No employer contribution 25 23 29
Source: Vanguard, 2018.
Figure 5. Safe harbor designs, 2017
Vanguard Retirement Plan Access defined contribution plans with employer contributions
All Established Start-up
Percentage of plans with employer contributions with safe harbor designs 69% 66% 77%
Type of safe harbor contribution
Automatic enrollment plans with a 3.5% employer match value <0.5% <0.5% <0.5%
Employer match with a 4% value 39 38 43
Employer match with a value >4% 14 14 16
Nonelective employer contribution with a 3% value 20 19 23
Nonelective employer contribution with a value >3% 27 29 18
Source: Vanguard, 2018.
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Total employer contributionsAs noted previously, three-quarters of VRPA plans provided either an employer match or nonelective contribution, or both, in 2017. The average and median value of the total employer contribution was 4.0% in 2017 (Figure 6). However, the value of employer contributions varies significantly from plan to plan. These contributions varied from less than 3% of wages for 1 in 5 plans, to 10% of wages or more for 1 in 10 plans. The most common employer contribution had a value of 4% of wages.
Automatic enrollment designAutomatic enrollment plan design reframes the savings decision. Instead of making a positive election to join the plan, employees are automatically enrolled and must take action to opt out. Automatic enrollment or autopilot designs are an important plan design feature that can increase plan participation and plan deferral rates. With an autopilot design, individuals are automatically enrolled in the plan, their deferral rates are automatically increased each year, and their contributions are automatically invested in a qualified default investment alternative (QDIA).
As of December 2017, 15% of VRPA plans permitting employee-elective deferrals had adopted automatic enrollment (Figure 7). Slightly more than half of these plans automatically enroll participants at a 3% contribution rate. More than one-third of these plans automatically increase the contribution rate annually. Nearly all of these plans use a target-date or other balanced investment strategy as the default fund, with 97% choosing a target-date fund as the default.
Participation rates
A plan’s participation rate—the percentage of eligible employees who choose to make employee-elective contributions—remains the broadest metric for gauging 401(k) plan performance. The most common measure of participation rates is calculated by taking the average of participation rates among a group of plans. We refer to this as the plan-weighted participation rate. In 2017, VRPA’s plan-weighted participation rate was 72% (Figure 8).
A second measure of participation rates considers all employees in VRPA plans as if they were in a single plan. We refer to this as the participant-weighted participation rate. Across the universe of VRPA participants, 6 in 10 eligible employees are enrolled in their employer’s voluntary savings program.
Plans with automatic enrollment have higher participation rates than plans with voluntary enrollment. The participant-weighted participation rate is 43% higher in plans with automatic enrollment.
Figure 6. Total employer contributions, 2017
Vanguard Retirement Plan Access defined contribution plans with employer contributions
30%
0%
18%
7%5%
13%
17%
26%
5%
9%
Perc
enta
ge o
f pl
ans
with
em
ploy
er c
ontr
ibut
ions
Value of employer contributions as a percentage of wages
Average 4.0% (median 4.0%)
<3% 3% >3%–<4%
4% >4%–<5%
5% >5%–<10%
10%+
Source: Vanguard, 2018.
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Figure 7. Automatic enrollment design
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
2013 2014 2015 2016 2017
All All All All All Established Start-up
Automatic enrollment adoption
Number of plans (n) 261 479 697 977 1,315 951 364
Percentage of plans 19% 18% 16% 15% 15% 15% 14%
Default automatic enrollment rate
1 percent 2% 3% 3% 3% 3% 4% 1%
2 percent 10 9 9 7 7 8 6
3 percent 65 62 59 57 54 55 51
4 percent 7 9 9 9 9 9 9
5 percent 11 10 10 11 13 12 15
6 percent or more 5 7 10 13 14 12 18
Default automatic increase rate
1 percent 40% 37% 35% 37% 37% 38% 35%
2 percent 1 1 1 1 1 1 1
3 percent 0 0 <0.5 <0.5 <0.5 <0.5 0
Not offered 59 62 64 62 62 61 64
Default fund
Target-date fund 95% 95% 96% 97% 97% 97% 97%
Other balanced fund 4 4 3 2 2 2 2
Model portfolio <0.5 1 1 1 1 1 1
Money market or stable value fund <0.5 <0.5 <0.5 <0.5 <0.5 <0.5 <0.5
Source: Vanguard, 2018.
Figure 8. Participation rates
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
Plan-weighted Participant-weighted
73% 72%
83%
64%
83%
65%
100%
0%
73%66%
2013 2014 2015 2016 Voluntaryenrollment
2017
71% 72% 70%
58%63%61%
2017 Automaticenrollment
2017
Source: Vanguard, 2018.
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Participation rates by employee demographicsParticipation rates vary considerably by employee demographics (Figure 9). Income is one of the primary determinants of plan participation rates. Only 41% of eligible employees with income of less than $30,000 contributed to their employer’s DC plan in 2017, while 86% of employees with income of more than $100,000 elected to participate. Even among the highest-paid employees, 14% of eligible workers still failed to take advantage of their employer’s DC plan.
Participation rates were lowest for employees younger than 25. Only 39% of employees younger than 25 made deferrals to their employer’s plan in 2017, while two-thirds of eligible employees between ages 45 and 64 saved for retirement in their employer’s plan. Tenure had a significant influence on plan participation. In 2017, only about half of employees with less than two years on the job participated in their employer’s plan, while 8 in 10 employees with tenure of ten years or more participated.
Figure 9. Participation rates by participant demographics
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
2013 2014 2015 2016 2017
All All All All AllVoluntary
enrollmentAutomatic
enrollment
All 66% 65% 64% 61% 63% 58% 83%
Income
<$30,000 49% 49% 45% 39% 41% 34% 73%
$30,000–$49,999 66 66 64 62 62 57 85
$50,000–$74,999 76 77 71 74 74 70 90
$75,000–$99,999 82 82 80 79 81 78 93
$100,000+ 87 86 86 85 86 84 93
Age
<25 46% 48% 45% 38% 39% 28% 74%
25–34 63 63 61 58 60 53 84
35–44 67 66 65 63 65 60 84
45–54 70 69 69 67 67 64 85
55–64 72 70 71 70 70 67 87
65+ 62 60 60 60 59 57 77
Gender
Male 66% 67% 65% 63% 63% 58% 84%
Female 66 64 63 61 64 60 84
Job tenure (years)
0–1 57% 58% 55% 47% 48% 37% 77%
2–3 62 61 62 62 63 57 89
4–6 66 65 66 69 69 66 91
7–9 72 70 70 72 73 70 93
10+ 80 78 78 79 80 78 94
Source: Vanguard, 2018.
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Impact of automatic enrollment on plan participationEmployees subjected to an automatic enrollment feature have an overall participation rate of 83%, compared with a participation rate of only 58% for employees hired under plans with voluntary enrollment.
Plans with automatic enrollment have higher participation rates across all demographic variables. For individuals earning less than $30,000 in plans with
automatic enrollment, the participation rate is more than double that of plans with voluntary enrollment.
Participation rates also vary by industry group (Figure 10). Employees in the law firms and the finance, insurance, and real estate groups had the highest participation rate, with more than three-quarters of workers participating in their employer’s plan. Employees in the media, entertainment, and leisure group had the lowest participation rate at 37%.
Figure 10. Participation rates by industry sector, 2017
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
Plan- weighted
Participant- weighted
Voluntary enrollment
Automatic enrollment
Overall 72% 63% 58% 83%
Industry group
Law firms 79% 80% 78% 88%
Finance, insurance, and real estate 77 73 70 83
Technology 75 73 66 87
Architectural, engineering, and related services 78 69 64 87
Business, professional, and nonprofit 74 65 60 85
Wholesale and retail trade 69 64 58 80
Ambulatory health care 72 63 61 83
Manufacturing 68 61 58 78
Agriculture, mining, and construction 67 61 56 82
Transportation, utilities, and communications 63 48 46 70
Education and health 63 46 38 86
Media, entertainment, and leisure 61 37 33 78
Source: Vanguard, 2018.
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Contributions
Employee deferralsIn a typical DC plan, employees are the main source of funding, while employer contributions play a secondary role. Thus, the level of participant deferrals is a critical determinant of whether the DC plan will generate an adequate level of savings for retirement. VRPA deferral rates are drawn from recordkeeping data and exclude eligible employees not contributing to their plans.
VRPA participants saved 7.1% of their income, on average, in their employer’s plan in 2017 (Figure 11). The median participant deferral rate was 5.1%, meaning that half of participants were saving above this rate and half were saving below it. Plans with voluntary enrollment have average deferral rates that are 27% higher and median deferral rates that are 19% higher than plans with automatic enrollment.
Deferral rates by participant demographicsAs with plan participation rates, participant demographics have a strong influence on deferral rates (Figure 12). Income is the primary determinant of deferral rates, which generally rise with income, but then decline as highly paid participants reach
either the statutory maximum contribution level or plan-imposed caps on contributions related to nondiscrimination testing. The statutory maximum contribution was $18,000 ($24,000 for participants age 50 and older), and a highly compensated employee was one who earned $120,000 or more in 2016 (based on the prior year for 2017).
In 2017, participants with incomes between $30,000 and $49,999 had deferral rates averaging 5.8%, while participants earning $75,000 to $99,999 had deferral rates of 7.8%—a savings rate that is about one-third higher. Deferral rates were 8.1% for participants earning $100,000 or more. Participants in the VRPA population earning less than $30,000 have higher deferral rates averaging 7.4%. However, a minority of these participants (3%) have very high deferral rates. When we exclude participants deferring more than 50%, then participants earning less than $30,000 had deferral rates averaging 5.6%.
Age is another important variable influencing savings. In 2017, deferral rates were lowest for participants younger than 25. This group saved only 5.2% of income. Deferral rates for participants ages 55 to 64 were nearly three-quarters higher, averaging 9.0%. Deferral rates also rose directly with employee tenure.
Figure 11. Deferral rates
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
Average Median
6.7% 6.7%6.0%
4.8%
10%
0%
7.1%
5.0% 5.0% 5.0% 5.0% 5.1%
2013 2014 2015 2016 Voluntaryenrollment
2017
6.9% 7.1%7.6%
5.7%
2017 Automaticenrollment
2017
Source: Vanguard, 2018.
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Impact of automatic enrollmentPlan design, specifically the predominant use of a 3% default deferral rate, means participants enrolled in plans through automatic enrollment are saving less. Participants joining a plan under an automatic enrollment feature have an average deferral rate of 6.0%, compared with 7.6% for participants joining plans under voluntary enrollment—a deferral rate that is 21% lower. This is especially remarkable in light of
the fact that participants earning less than $30,000 save twice as much, on average, under voluntary enrollment designs. This suggests that higher default deferral rates would be amenable to plan participants in automatic enrollment designs.
Our research on automatic enrollment indicates that “quit rates” do not deteriorate when higher default percentages are used to enroll employees.2
Figure 12. Deferral rates by participant demographics
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
2013 2014 2015 2016 2017
All All All All AllVoluntary
enrollmentAutomatic
enrollment
All 7.1% 6.7% 6.7% 6.9% 7.1% 7.6% 6.0%
Income
<$30,000 7.5% 6.3% 5.9% 6.8% 7.4% 9.3% 4.6%
$30,000–$49,999 6.4 5.4 5.4 5.5 5.8 6.2 4.7
$50,000–$74,999 6.9 6.6 6.5 6.5 6.7 7.0 5.9
$75,000–$99,999 7.7 7.7 7.6 7.6 7.8 8.1 7.0
$100,000+ 7.7 7.8 8.0 8.0 8.1 8.2 7.8
Age
<25 4.8% 4.8% 4.6% 4.9% 5.2% 6.1% 4.3%
25–34 5.7 5.5 5.5 5.7 5.9 6.2 5.3
35–44 6.7 6.3 6.2 6.4 6.6 6.9 5.9
45–54 7.6 7.1 7.2 7.3 7.6 7.9 6.6
55–64 9.2 8.5 8.6 8.7 9.0 9.2 7.7
65+ 11.0 10.5 10.5 10.4 10.6 11.0 8.9
Gender
Male 7.3% 6.7% 6.7% 6.9% 7.1% 7.5% 6.0%
Female 6.9 6.6 6.6 6.8 7.2 7.6 5.9
Job tenure (years)
0–1 6.2% 5.5% 5.3% 5.6% 6.0% 6.9% 5.1%
2–3 6.5 6.3 6.5 6.5 6.6 6.9 6.0
4–6 7.0 6.9 6.9 6.9 7.2 7.2 6.7
7–9 7.7 7.1 7.2 7.4 7.7 7.8 7.4
10+ 8.5 8.1 8.4 8.3 8.6 8.6 8.6
Source: Vanguard, 2018.
2 For an in-depth analysis of automatic enrollment, see Clark, Jeffrey W., and Jean A. Young, 2018, Automatic enrollment: The power of the default, Vanguard research, institutional.vanguard.com.
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Deferral rates also vary—by about one-third—by industry group (Figure 13). Participants in the law firms and architectural, engineering, and related services groups had the highest median deferral rates in 2017. Participants in the education and health group and the transportation, utilities, and communications group had the lowest deferral rates.
Maximum contributorsDuring 2017, only 12% of participants saved the statutory maximum dollar amount of $18,000 ($24,000 for participants age 50 or older) (Figure 14). Participants who contributed the maximum dollar amount tended to have higher incomes, were older,
had longer tenures with their current employer, and had accumulated substantially higher account balances. Nearly 1 in 5 participants were saving 10% or more from their income.
Catch-up contributionsNearly all VRPA plans offered catch-up contributions in 2017. Only 17% of age-50-and-older participants eligible for catch-up contributions took advantage of this feature in 2017. The characteristics of participants making catch-up contributions are similar to those of participants making the maximum contribution to their plan. They tended to have higher incomes and had accumulated substantially higher account balances.
Figure 13. Deferral rates by industry sector, 2017
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
Average Median
Voluntary enrollment
average
Automatic enrollment
average
Overall 7.1% 5.1% 7.6% 6.0%
Industry group
Law firms 8.3% 6.2% 8.6% 6.7%
Architectural, engineering, and related services 7.9 6.0 8.3 6.7
Technology 7.8 6.0 8.3 7.3
Finance, insurance, and real estate 7.5 6.0 8.0 6.1
Business, professional, and nonprofit 7.3 5.2 8.0 5.8
Ambulatory health care 8.0 5.0 8.3 5.8
Agriculture, mining, and construction 6.9 5.0 7.2 6.0
Wholesale and retail trade 6.3 5.0 7.1 4.9
Media, entertainment, and leisure 6.3 5.0 6.8 4.2
Manufacturing 6.2 5.0 6.6 4.9
Transportation, utilities, and communications 5.7 4.8 6.0 3.9
Education and health 6.4 4.6 7.3 4.4
Source: Vanguard, 2018.
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Roth contributionsAt year-end 2017, the Roth feature was offered by 8 in 10 VRPA plans and had been adopted by 15% of participants in plans offering the feature.
After-tax contributionsAfter-tax employee-elective deferrals are available to participants in only 3% of VRPA plans. In 2017, 1% of participants offered the after-tax deferral feature took advantage of it.
Figure 14. Other employee contribution data
Vanguard Retirement Plan Access defined contribution plans permitting employee-elective deferrals
2013 2014 2015 2016 2017
All All All All All Established Start-up
Percentage of participants reaching 402(g) limit 12% 11% 12% 12% 12% 12% 11%
Percentage of participants deferring more than 10% 19 18 18 19 19 19 20
Percentage of plans offering catch-up 99 >99.5 >99.5 >99.5 >99.5 >99.5 >99.5
Percentage of participants using catch-up if offered 17 18 18 17 17 18 16
Percentage of plans offering Roth 73 75 76 78 81 78 87
Percentage of participants using Roth if offered 13 14 14 15 15 15 16
Percentage of plans offering traditional after-tax 3 2 3 3 3 3 1
Percentage of participants using traditional after-tax if offered <0.5 1 1 <0.5 1 <0.5 5
Source: Vanguard, 2018.
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14 > Vanguard Retirement Plan Access
Aggregate contributionsTaking into account both employee and employer contributions, the average total participant contribution rate in 2017 was 9.7% and the median
was 8.1% (Figure 15). Established and start-up plans had similar aggregate contribution levels.
Figure 15. Aggregate participant and employer contribution rates
Vanguard Retirement Plan Access defined contribution plans
Average Median
9.1% 9.0%9.8%
8.5%
15%
0%
9.5%
7.6% 7.9% 7.5% 8.0% 8.1%
2013 2014 2015 2016 Established 2017
9.3% 9.7% 9.6%
8.1%
2017 Start-up 2017
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 15
Figure 16. Account balances
Vanguard Retirement Plan Access defined contribution plans
Average Median
$75,000
$02013 2014 2015 2016 Established 20172017 Start-up 2017
$55,657 $53,959 $52,206 $55,480
$61,525
$69,959
$23,468
$11,171 $9,601 $9,398 $10,085 $11,182 $13,314
$5,550
Source: Vanguard, 2018.
Account balances
Account balances are a widely cited measure of the overall effectiveness of DC plans. However, current balances may not reflect lifetime savings and are only a partial measure of retirement preparedness for many participants. The median balance represents the typical participant: half of all participants have balances above the median and half have balances below.
In 2017, the average account balance for VRPA participants was $61,525; the median balance was $11,182 (Figure 16). Established plans had account balances that were two to three times larger than start-up plans.
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16 > Vanguard Retirement Plan Access
Account balances by participant demographicsMedian and average account balances vary considerably by participant demographics (Figure 17). Among the factors influencing account balances are income, age, and job tenure. These three factors are intertwined. Not only do incomes, on average, tend to rise somewhat with age, making saving more affordable, but older participants generally save at
higher rates. Also, the longer an employee’s tenure with a firm, the more likely the employee is to earn a higher salary, participate in the plan, and contribute at higher levels. Longer-tenured participants also have higher balances because they have been contributing to their employer’s plan for a longer period.
Figure 17. Account balances by participant demographics, 2017
Vanguard Retirement Plan Access defined contribution plans
Average MedianEstablished
averageStart-up average
All $61,525 $11,182 $69,959 $23,468
Income
<$30,000 $17,591 $1,875 $21,538 $6,948
$30,000–$49,999 $24,300 $6,402 $27,299 $11,585
$50,000–$74,999 $44,083 $14,229 $50,445 $17,321
$75,000–$99,999 $66,640 $24,344 $77,281 $28,074
$100,000+ $164,722 $57,761 $197,158 $53,975
Age
<25 $3,749 $1,387 $3,897 $3,303
25–34 $15,308 $5,889 $16,580 $10,822
35–44 $44,400 $13,747 $49,174 $23,507
45–54 $85,121 $21,067 $94,991 $35,819
55–64 $127,377 $28,935 $141,378 $43,019
65+ $168,190 $39,539 $180,490 $56,176
Gender
Male $80,860 $14,569 $92,925 $28,832
Female $45,542 $9,882 $51,156 $18,223
Job tenure (years)
0–1 $10,386 $2,485 $9,728 $12,231
2–3 $21,839 $8,523 $22,094 $20,866
4–6 $40,653 $17,534 $43,271 $25,138
7–9 $69,262 $29,304 $74,283 $33,867
10+ $184,650 $74,639 $199,868 $59,717
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 17
There are significant variations in account balances by industry sector, which reflect a complex mixture of firm characteristics (influencing employer contributions) and workforce demographics (influencing participant savings rates). Participants employed in the law firms group have average and
median account balances that are more than two times higher than other participants (Figure 18). Participants employed in the education and health group have the lowest average and median account balances.
Figure 18. Account balances by industry sector, 2017
Vanguard Retirement Plan Access defined contribution plans
Average MedianEstablished
averageStart-up average
Overall $61,525 $11,182 $69,959 $23,468
Industry group
Law firms $147,126 $25,800 $155,068 $67,360
Architectural, engineering, and related services $75,708 $18,823 $78,605 $42,140
Finance, insurance, and real estate $76,012 $17,957 $81,632 $34,134
Technology $51,166 $13,945 $58,895 $19,732
Agriculture, mining, and construction $66,296 $11,785 $72,092 $22,254
Manufacturing $54,747 $10,959 $58,293 $21,397
Business, professional, and nonprofit $54,110 $10,872 $61,266 $17,009
Ambulatory health care $95,084 $10,816 $103,779 $33,926
Wholesale and retail trade $54,451 $8,482 $58,188 $24,534
Media, entertainment, and leisure $39,676 $8,356 $41,313 $25,794
Transportation, utilities, and communications $38,540 $7,868 $40,013 $25,507
Education and health $30,357 $6,722 $32,312 $15,537
Source: Vanguard, 2018.
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18 > Vanguard Retirement Plan Access
Asset and contribution allocations
The percentage of plan assets invested in equities stood at 73% in 2017 (Figure 19). The allocation to equities includes the equity component of balanced strategies. In 2017, investment in balanced strategies reached 49%, including 44% in target-date funds and 5% in other balanced options. The growth of target-date funds in particular is dramatically reshaping investment patterns in DC plans, including increasing equity allocation differences by age and reducing extreme allocations.
Three-quarters of plan contribution dollars were invested in equities during 2017 and half of plan contribution dollars were invested in target-date funds (Figure 20).
Overall asset allocation varies somewhat by industry group (Figure 21). Participants in the technology group had the highest equity allocations—a median of 88%. Participants in the manufacturing group had median equity allocations of 79%.
Figure 19. Plan asset allocation summary
Vanguard Retirement Plan Access defined contribution plans
40% 40% 39% 38% 38% 38% 35%
36% 39% 41% 42% 44% 42% 55%
7% 7% 6% 6% 5% 6% 7% 8% 7% 7% 6% 7%
4% 7% 5% 6% 6% 5% 5%
100%
0% 2013
73%equities
73%equities
72%equities
71%equities
73%equities
73%equities
78%equities
2014 2015 2016 Established 20172017 Start-up 2017
Brokerage Companystock
Diversi�edequity funds
CashOther balanced funds
Bond funds
Target-datefunds
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 19
Figure 20. Plan contribution allocation summary
Vanguard Retirement Plan Access defined contribution plans
38% 36% 36% 34% 33% 33% 32%
42% 48% 50% 50% 52% 51% 60%
6% 5% 4% 4% 4% 4%
7% 6% 5% 5% 5% 5% 7% 5% 5% 7% 6% 7%
100%
0% 2013 2014 2015 2016 Established 20172017 Start-up 2017
Diversi�edequity funds
Target-datefunds
Other balanced funds
Bond funds Cash
73%equities
76%equities
77%equities
74%equities
75%equities
74%equities
80%equities
Source: Vanguard, 2018.
Figure 21. Asset allocation by industry sector, 2017
Vanguard Retirement Plan Access defined contribution plans
BrokerageCompany
stock
Diversified equity funds
Target- date
funds
Other balanced
fundsBond funds Cash
Average equity
participant-weighted
Median equity
participant-weighted
All asset-weighted 2% <0.5% 38% 43% 5% 6% 5%
Industry group
Technology <0.5% 0% 40% 47% 3% 6% 4% 80% 88%
Business, professional, and nonprofit 1% 0 40 43 5 6 5 77 87
Media, entertainment, and leisure <0.5 0 36 47 7 4 6 77 86
Architectural, engineering, and related services <0.5 0 43 41 6 6 4 77 84
Finance, insurance, and real estate 1 <0.5 47 36 4 7 5 76 84
Wholesale and retail trade <0.5 0 37 44 7 6 6 75 84
Transportation, utilities, and communications 0 0 36 48 5 6 5 75 84
Ambulatory health care 2 0 37 44 5 8 4 74 84
Agriculture, mining, and construction 1 0 35 48 5 6 5 74 83
Law firms 4 0 40 37 7 7 5 73 83
Education and health <0.5 0 32 52 6 6 4 74 82
Manufacturing <0.5 0 37 44 7 6 6 72 79
Source: Vanguard, 2018.
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20 > Vanguard Retirement Plan Access
Plan investment options
Types of options offeredVirtually all VRPA plans offer an array of investment options covering four major investment categories:
equities, bonds, balanced funds, and cash reserves (Figure 22). Equity offerings typically include both indexed and actively managed U.S. stock funds as well as one or more international funds.
Figure 22. Types of investment options offered and used, 2017
Vanguard Retirement Plan Access defined contribution plans
Percentage of all plans offering
Percentage of established plans offering
Percentage of start-up
plans offering
Percentage of participants offered using
Cash 99% 99% 99% 10%
Money market 82 79 91 8
Stable value/Investment contract 16 19 8 16
Bond funds >99.5% >99.5% >99.5% 13%
Active 60 69 40 12
Index 85 83 90 9
Inflation-protected securities 32 36 22 5
High-yield 28 31 19 7
International 64 58 77 5
Balanced funds >99.5% 99% >99.5% 82%
Target-date 98 98 99 76
Other balanced 80 80 82 13
Equity funds >99.5% >99.5% >99.5% 30%
Domestic equity funds >99.5% >99.5% >99.5% 29%
Active domestic 59 66 42 20
Index domestic 99 99 99 26
Large-cap >99.5 >99.5 >99.5 26
Mid-cap 94 93 94 15
Small-cap 95 95 95 15
Socially responsible 7 8 5 8
International equity funds 99% 99% 99% 16%
Active international 52 59 35 14
Index international 87 85 92 11
Emerging markets 71 68 78 10
Sector funds 75% 76% 72% 12%
REIT 70 71 69 9
Health care 18 19 13 10
Energy 13 14 9 6
Precious metals 8 9 5 5
Technology 10 11 8 9
Communications 1 1 2 3
Utilities 6 7 5 5
Commodities 2% 2% 1% 16%
Company stock <0.5% <0.5% 0% 73%
Self-directed brokerage 12% 13% 9% 2%
Model portfolio 6% 8% 3% 20%
Advice 2% 2% 1% 0%
Managed account 21% 19% 27% <0.5%
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 21
Number of options offered and usedThe average VRPA plan offered 20.3 investment options in 2017 (Figure 23). In the plan analysis of options offered, we count a series of target-date funds as one fund, since these funds are designed as a single-fund investment. Counting a target-date
series as a single fund offering, the median plan sponsor offered 19 investment options in 2017. In 2017, 1 in 5 plans offered more than 25 distinct investment options, while 5% of plans offered 10 or fewer (Figure 24).
Figure 23. Investment options offered and used
Vanguard Retirement Plan Access defined contribution plans
Average each target-date fund counted as a single option Median each target-date fund counted as a single option
Average number of funds used by participants Median number of funds used by participants
20.1 20.2 20.320.019.6 20.019.0
20.0 19.2 19.0
2.9 2.7 2.6 2.4 2.01.0 1.0 1.0 1.0
20.7 20.0
2.51.0
20.219.0
2.51.0 1.0
25.0
0.0
2013 2014 2015 Established2017
2016 2017 Start-up2017
Source: Vanguard, 2018.
Figure 24. Number of options offered, 2017
Vanguard Retirement Plan Access defined contribution plans
Target-date funds counted as one option
All Established
5%
16%
24%
<0.5%<0.5%
5%
26%
15%
6% 6%
<0.5%
5%
19% 19%
3%
13%15%
9%
36%33%
45%50%
0%
1–5 6–10 11–15 26–3016–20 21–25 31+
Start-up
Source: Vanguard, 2018.
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22 > Vanguard Retirement Plan Access
Despite the large number of funds available to them, participants tend to use only a few. On average, VRPA plan participants used 2.4 funds and the typical participant held just one fund. In the participant analysis of options used, we count each target-date fund used as a separate fund, rather than considering them to be one fund. This is because participants can, and some do, invest in multiple target-date funds.
Default fundsIncreasingly, participants are being directed into default investments selected by the plan sponsor, rather than making active investment choices on their own. Default investing is rising in importance in response to concerns about the lack of investment knowledge among participants, as well as the
growing use of automatic enrollment. In response to these developments, the U.S. Department of Labor (DOL), acting under the Pension Protection Act, authorized three types of default investments as eligible for special fiduciary protection. These options include target-date funds, other balanced funds, and managed account programs (including model portfolios).
Nearly all VRPA plans have designated a default fund, and 96% had selected a target-date fund option as the default option in 2017 (Figure 25). Ninety-eight percent of plans had specifically designated a QDIA under the DOL’s regulations. Among all VRPA plans, 97% of designated QDIAs were target-date funds, 2% were balanced funds, and 1% selected a model portfolio.
Figure 25. Default fund designations, 2017
Vanguard Retirement Plan Access defined contribution plans
All plans
Established plans
Start-up plans
Plans designating a default 100% 100% 100%
Target-date 96 95 97
Balanced fund 2 3 2
Model portfolio 1 1 <0.5
Money market or stable value 1 1 <0.5
Other <0.5 <0.5 <0.5
Plans designating a QDIA 98% 98% 99%
Target-date 97 97 98
Balanced fund 2 2 2
Model portfolio 1 1 <0.5
100% 100% 100%
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 23
Professionally managed allocations
The most notable effect of plan investment menus on participant choices is the expanded offering and use of professionally managed allocations. Participants with professionally managed allocations are those who have their entire account balance invested solely in a single target-date fund, traditional balanced fund, a model portfolio, or a managed account program.
In 2017, nearly two-thirds of VRPA participants were invested in a professionally managed allocation (Figure 26). Driving this development is the growing
use of target-date funds. A total of 59% of participants were invested in a single target-date fund in 2017. Among new plan entrants (those entering the plan for the first time), three-quarters of participants were invested in a single target-date fund.
Most VRPA plan sponsors chose to reenroll participants in a QDIA at conversion. As noted earlier in this report, VRPA was launched in 2011 and the majority of these plans converted between 2012 and 2017. Seven in 10 plans reenrolled participants in a QDIA at conversion and more than 95% using this strategy reenrolled in a target-date fund.
Figure 26. Participants with professionally managed allocations
Vanguard Retirement Plan Access defined contribution plans
Participants using a managed account or model portfolio
Participants holding a single balanced fund
52%
60% 62% 62% 64% 63%69%
79%
100%
0%
2013 2014 2015 Established2017
2016 2017 Start-up2017
New planentrants 2017
Participants holding a single target-date fund
46% 54% 57% 57% 59% 58%
67% 75%
4%
Source: Vanguard, 2018.
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24 > Vanguard Retirement Plan Access
Target-date funds
Target-date funds base portfolio allocations on an expected retirement date; allocations grow more conservative as the participant approaches the fund’s target year. At year-end 2017, nearly all VRPA
participants were in plans offering target-date funds (Figure 27). Three-quarters of all participants had all or part of their account invested in target-date funds in 2017. Slightly more than half of contribution dollars were directed to target-date funds in 2017.
Figure 27. Use of target-date funds
Vanguard Retirement Plan Access defined contribution plans
2013 2014 2015 2016 2017Established
2017Start-up
2017
Percentage of all plans offering target-date funds 97% 97% 97% 98% 98% 98% 99%
Percentage of recordkeeping assets in target-date funds 36 39 41 42 44 42 55
Percentage of all contributions directed to target-date funds 42 48 50 50 52 50 60
Percentage of all participants offered target-date funds 97 96 98 98 98 97 98
Percentage of all participants using target-date funds 67 73 75 75 76 75 82
Source: Vanguard, 2018.
Note: Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target-date funds is not guaranteed at any time, including on or after the target date.
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Vanguard Retirement Plan Access > 25
Figure 28. Distribution of equity exposure
Vanguard Retirement Plan Access defined contribution plans
Participant-weighted balances
2013 2014 2015 2016 2017Established
2017Start-up
2017
Percentage of contributions to
equities 2017
Percentage of account balances
0% 4% 3% 3% 4% 4% 4% 2% 2%
1%–30% 3 2 2 3 3 3 1 3
31%–40% 2 2 2 1 1 1 1 2
41%–50% 2 3 3 3 3 3 2 3
51%–60% 7 9 8 8 7 7 5 7
61%–70% 15 10 10 15 14 15 13 14
71%–80% 13 12 18 12 11 12 10 12
81%–90% 39 45 41 42 44 42 51 43
91%–99% 7 6 6 5 6 6 6 6
100% 8 8 7 7 7 7 9 8
Average equity participant-weighted 75 76 77 75 75 74 80 75
Median equity participant-weighted 83 84 87 85 85 83 88 85
Source: Vanguard, 2018.
Participant equity allocations
Equities are the dominant asset class holding of many plan participants. From an investment perspective, an asset allocation to equities of 80% or more may appear appropriate in light of the long-term retirement objectives of most DC plan participants (Figure 28).
The growing use of professionally managed allocations within DC plans, including target-date funds, is reshaping equity allocations by age and reducing extreme allocations. The fraction of participants with no allocation to equities was 4% in 2017. At the other extreme, the fraction of participants investing exclusively in equities was 7%.
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26 > Vanguard Retirement Plan Access
This rising use of professionally managed allocations is also improving portfolio construction (Figure 29). The fraction of participants holding broadly diversified portfolios was 80% in 2017. Less than 1% of VRPA participants were holding concentrated company stock positions.
Trading activity
Participant trading or exchange activity is the movement of existing account assets from one plan investment option to another. This transaction is distinct from a contribution allocation decision, in which participants decide how future contributions to the plan should be invested. Exchange activity is
a proxy for a participant’s holding period for investments, as well as a measure of the participant’s willingness to change their portfolio in response to short-term market volatility.
Daily trading is nearly universal for Vanguard DC plans, with virtually all plan sponsors allowing it. While assets can be traded daily, Vanguard and other investment companies serving DC plans typically have “round-trip” restrictions designed to thwart the minority of individual participants who seek to engage in active market-timing or day-trading. In 2017, only 7% of participants initiated one or more portfolio trades or exchanges during the year (Figure 30).
Figure 29. Participant portfolio construction
Vanguard Retirement Plan Access defined contribution plans
3%
4%
80%
13%
<0.5%
Zero equity
Conservative equity
Balanced strategies
Aggressive equity
Aggressive company stock
2013 2014 2015 2016 2017Established
2017Start-up
2017
Percentage participants using
Zero equity (0% equity and 0% company stock) 4% 3% 3% 4% 3% 4% 2%
Conservative equity (>0% and <40% equity) 5 4 4 4 4 4 2
Balanced strategies (40% to 90% equity and <20% company stock) 76 79 80 80 80 79 81
Aggressive equity (>90% equity) 14 14 13 12 13 13 15
Aggressive company stock (>20% company stock) 1 <0.5 <0.5 <0.5 <0.5 <0.5 0
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 27
Plan loans
If permitted by the plan, participants can borrow up to 50% of their balance (up to a maximum of $50,000) from their DC plan account. Loans are more common for plans accepting employee contributions and less common for employer-funded DC plans, such as money purchase or profit-sharing plans. Plan loans allow DC participants to access their plan savings before retirement without incurring income taxes or tax penalties.
Loans do appear to have a beneficial effect on retirement savings, raising contribution rates above what they would otherwise be. Yet they also come with risks. Cash that has been borrowed earns fixed income rather than equity market returns, and loan interest is double-taxed. Also, participants who leave their employer must typically repay any loan balance immediately—or risk paying taxes and a penalty and incurring a reduction in retirement savings by the amount of the loan outstanding.
Figure 30. Participant-directed trading
Vanguard Retirement Plan Access defined contribution plans
0%
15%
Perc
enta
ge o
f pa
rtic
ipan
ts t
radi
ng
6%5%
6%5%
7%
5%
7%
2013 2014 2015 2016 2017 Established2017
Start-up2017
Source: Vanguard, 2018.
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28 > Vanguard Retirement Plan Access
Loan availabilityLoans are widely offered by employee-contributory DC plans. In 2017, 7 in 10 VRPA 401(k) plans permitted participants to borrow from their plan and 77% of participants had access to a loan feature (Figure 31). Only 8% of VRPA participants offered a loan had a loan outstanding at year-end 2017.
On average, the outstanding loan account balance equaled 10% of the participant’s account balance, including the loan, and the average participant had borrowed about $8,749. Participants in start-up
plans were least likely to have borrowed from their retirement plan account, but if they had borrowed, they borrowed 13% of their account balance. Outstanding loans are typically excluded from measures of plan and participant assets because these assets have, in effect, been withdrawn from the plan and are not currently available as a retirement resource. However, more than 90% of loans are repaid and outstanding loans represent participant and plan assets. Only about 1% of aggregate plan assets had been borrowed by participants.
Figure 31. Loans
Vanguard Retirement Plan Access defined contribution plans
Percentage of participants with loans if offered
Percentage of acount balance borrowed
9% 9%8%
9%
4%
8%
25%
0%
10%
12% 12% 12%11%
10% 10%
13%
2013 2014 2015 2016 Established 20172017 Start-up 2017
2013 2014 2015 2016 2017Established
2017Start-up
2017
Percentage of all plans offering loans 72% 71% 69% 70% 69% 71% 65%
Percentage of participants offered loans 81 82 79 78 77 78 71
Percentage of recordkeeping assets borrowed 2 1 1 1 1 1 1
Average participant loan $8,539 $8,409 $8,541 $8,648 $8,749 $8,841 $7,843
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 29
Plan withdrawals
Plan withdrawals allow participants to access their plan savings before a job change or retirement. Withdrawals are optional plan provisions and availability varies from plan to plan. They can be classified into two categories. Hardship withdrawals allow participants to access a portion of their savings when they have a demonstrated financial hardship, such as receipt of an eviction or home foreclosure notice, but may also be used for such purposes as college education and purchase of a first home. Nonhardship withdrawals include both post-age-59½ withdrawals and other withdrawals. Post-age-59½ withdrawals allow participants age 59½ and older to access their savings while they are working and are exempt from the 10% penalty on premature
distributions. Some plans may also allow participants to withdraw employer profit-sharing contributions, after-tax contributions, or rollover assets while they are working.
Among VRPA DC plans in 2017, 85% allowed hardship withdrawals and 99% allowed plan withdrawals for those who have reached age 59½ (Figure 32). In 2017, less than 1% (0.8%) of participants in plans offering any type of withdrawal used the feature, and the average portion of account balance withdrawn was 38%. Assets withdrawn totaled 1% of VRPA recordkeeping assets. Certain participants could, over time, jeopardize their retirement program if they continue to rely on this feature throughout their working careers.
Figure 32. Withdrawals
Vanguard Retirement Plan Access defined contribution plans
Percentage of participants with withdrawals if offered
Percentage of acount balance withdrawn
0.6% 0.7% 0.7% 0.8% 0.6%0.8%
60%
0% 0.5%
40%
48% 47%44%
38% 38% 36%
2013 2014 2015 2016 Established 20172017 Start-up 2017
2013 2014 2015 2016 2017Established
2017Start-up
2017
Percentage of all plans offering withdrawals >99.5% 99% 99% >99.5% >99.5% >99.5% >99.5%
Percentage of all plans offering hardship withdrawals 86 85 84 84 85 82 90
Percentage of all plans offering age 59½ withdrawals 99 99 99 99 99 99 >99.5
Percentage of all plans offering employer contribution withdrawals 90 91 92 94 96 96 96
Percentage of all participants offered withdrawals >99.5 >99.5 >99.5 >99.5 >99.5 >99.5 >99.5
Percentage of recordkeeping assets withdrawn 1 1 1 1 1 1 1
Average participant withdrawal $30,878 $23,034 $21,126 $22,277 $20,913 $23,152 $7,993
Source: Vanguard, 2018.
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30 > Vanguard Retirement Plan Access
Plan distributions and rollovers
When changing jobs or retiring, DC plan participants have the choice of preserving their savings for retirement (by retaining them in the plan or rolling them over to an IRA or another DC plan) or taking a cash lump sum (and spending or investing it). If they choose to roll over their savings to an IRA or another qualified retirement plan, participants avoid paying taxes on the accumulated balance. If participants spend the lump-sum distribution or invest it in a taxable account, they incur a possible income tax liability (and a 10% penalty if they are younger than 59½).
All VRPA plans permit indefinite deferral of savings, meaning that participant balances can remain in the employer plan (Figure 33). Seven percent of VRPA plans allow participants to establish installment payments. Virtually all VRPA plans permit terminated participants to take partial ad hoc cash distributions.
Participant and asset flowsPlan distributions can occur reasonably frequently as participants change jobs or retire, and they represent a large portion of total plan and participant assets. During 2017, about one-third of VRPA plan participants could have taken their plan account as a cash distribution because they had separated from service in the current year or prior years. However, just 13% of participants eligible for a cash distribution took one, while the vast majority (87%) continued to preserve their plan assets for retirement (Figure 34).
These figures differ from other reported statistics on plan distributions because they include participants who choose to retain their assets in their prior employer’s plan when they change jobs or retire. Among only those participants who took a distribution from their plan, more took cash distributions (13%) than rolled over their assets to another plan or IRA (11%). But in our view, a full assessment of plan distribution behavior must include participants who kept their assets within their prior employer’s plan at the time of a job change or retirement.
Figure 33. Distribution options, 2017
Vanguard Retirement Plan Access defined contribution plans
All Established Start-up
Deferral 100% 100% 100%
Installments other than RMDs 7 9 2
Ad hoc partial distributions 100 100 100
Source: Vanguard, 2018.
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Vanguard Retirement Plan Access > 31
Figure 34. Plan distributions
Vanguard Retirement Plan Access defined contribution plans
Percentage of participants preserving assets
Percentage of assets preserved for retirement
85% 87% 88% 87% 89%87%
100%
0%
87%
96% 96% 96% 97% 97% 97% 96%
2013 2014 2015 2016 Established 20172017 Start-up 2017
2013 2014 2015 2016 2017Established
2017Start-up
2017
Percentage of participants choosing
Remain in plan 77% 73% 75% 77% 76% 76% 77%
Rollover 10 12 12 11 11 11 12
Remain in plan and rollover <0.5 <0.5 <0.5 <0.5 <0.5 <0.5 <0.5
Installment payments <0.5 <0.5 <0.5 <0.5 <0.5 <0.5 0
Participants preserving assets 87 85 87 88 87 87 89
Cash lump sum 12 14 12 11 12 12 11
Rollover and cash 1 1 1 1 1 1 <0.5
Percentage of assets available for distribution
Remain in plan 78% 76% 74% 77% 78% 78% 77%
Rollover 17 19 21 19 19 19 19
Remain in plan and rollover <0.5 <0.5 <0.5 <0.5 <0.5 <0.5 <0.5
Installment payments <0.5 <0.5 <0.5 1 <0.5 <0.5 <0.5
Assets preserved for retirement 96 96 96 97 97 97 96
Cash lump sum 3 3 3 2 2 2 3
Rollover and cash 1 1 1 1 1 1 1
Source: Vanguard, 2018.
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32 > Vanguard Retirement Plan Access
Appendix
In this table we provide a comparison of VRPA key statistics with the How America Saves population recordkept directly by Vanguard.
Vanguard Retirement Plan Access comparison with How America Saves
Vanguard Retirement Plan AccessHow America
Saves
2013 2014 2015 2016 2017 2017
Vanguard recordkeeping statistics
Number of participant accounts 61,746 125,136 199,242 273,045 370,414 4.6 million
Number of plans 1,418 2,666 4,452 6,506 8,873 1,900
Median participant age 42 42 42 42 42 45
Median participant tenure 4 4 4 4 4 6
Percentage male 56% 56% 56% 57% 57% 58%
Median eligible employee income (thousands) $53 $47 $47 $49 $48 $59*
Median participant income (thousands) $67 $58 $59 $64 $63 $67*
Median nonparticipant income (thousands) $35 $29 $30 $30 $28 $33*
1. Accumulating
Plan design
Plans offering immediate eligibility for employee contributions 24% 23% 22% 21% 21% 67%*
Plans providing an employer contribution 75% 72% 72% 75% 75% 96%*
Plans with automatic enrollment 19% 18% 16% 15% 15% 46%
Plans with automatic enrollment with automatic annual increases 41% 38% 36% 38% 38% 66%
Plans offering catch-up contributions 99% >99.5% >99.5% >99.5% >99.5% 98%
Plans offering Roth contributions 73% 75% 76% 78% 81% 68%
Plans offering after-tax contributions 3% 2% 3% 3% 3% 17%
Participation rates
Plan-weighted participation rate 73% 73% 72% 71% 72% 81%*
Participant-weighted participation rate 66% 65% 64% 61% 63% 72%*
Voluntary enrollment participant-weighted participation rate 62% 59% 58% 57% 58% 57%*
Automatic enrollment participant-weighted participation rate 87% 89% 88% 82% 83% 92%*
Participants using catch-up contributions (when offered) 17% 18% 18% 17% 17% 14%*
Participants using Roth (when offered) 13% 14% 14% 15% 15% 12%*
Participants using after-tax (when offered) <0.5% 1% 1% <0.5% 1% 7%*
Employee deferrals
Average participant deferral rate 7.1% 6.7% 6.7% 6.9% 7.1% 6.8%*
Median participant deferral rate 5.0% 5.0% 5.0% 5.0% 5.1% 6.0%*
Percentage of participants deferring more than 10% 19% 18% 18% 19% 19% 20%*
Voluntary enrollment plan average participant deferral rate 7.5% 7.1% 7.2% 7.3% 7.6% 7.0%*
Automatic enrollment plan average participant deferral rate 5.7% 5.6% 5.5% 5.7% 6.0% 6.7%*
Participants reaching 402(g) limit ($18,000 in 2017) 12% 11% 12% 12% 12% 13%*
Average total contribution rate (participant and employer) 9.5% 9.1% 9.0% 9.3% 9.7% 10.3%*
Median total contribution rate (participant and employer) 7.6% 7.9% 7.5% 8.0% 8.1% 9.6%*
Account balances
Average balance $55,657 $53,959 $52,206 $55,480 $61,525 $103,866
Median balance $11,171 $9,601 $9,398 $10,085 $11,182 $26,331
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Vanguard Retirement Plan Access > 33
Vanguard Retirement Plan AccessHow America
Saves
2013 2014 2015 2016 2017 2017
2. Managing
Asset and contribution allocation
Average plan asset allocation to equities 73% 73% 72% 71% 73% 73%
Average plan contribution allocation to equities 73% 76% 77% 74% 75% 75%
Average plan asset allocation to target-date funds 36% 39% 41% 42% 43% 33%
Average plan contribution allocation to target-date funds 42% 48% 50% 50% 52% 54%
Participants with balanced strategies 76% 79% 80% 80% 80% 74%
Extreme participant asset allocations (100% fixed income or equity) 12% 11% 10% 11% 11% 10%
Plan investment options
Average number of funds offered 19.6 20.1 20.2 20.2 20.3 18.0
Average number of funds used 2.9 2.7 2.6 2.5 2.4 2.5
Percentage of plans designating a QDIA 98% 98% 98% 98% 98% 79%
Among all plans designating a QDIA, percentage target-date fund 96% 96% 96% 97% 97% 96%
Plans offering target-date funds 97% 97% 97% 98% 98% 92%
Participants using target-date funds (when offered) 67% 73% 75% 75% 76% 77%
Plans offering managed account program or a model portfolio 20% 25% 29% 31% 27% 30%
Participants with professionally managed allocations 52% 60% 62% 62% 64% 58%
Participants using a single target-date fund 46% 54% 57% 57% 59% 51%
Participants using a single risk-based balanced fund 4% 3% 3% 3% 3% 4%
Participants using a managed account program or model portfolio 2% 3% 2% 2% 2% 3%
Plans actively offering company stock <0.5% <0.5% <0.5% <0.5% <0.5% 9%
Participants with >20% company stock 1% <0.5% <0.5% <0.5% <0.5% 5%
Trading activity
Participant-directed trading 6% 6% 5% 5% 7% 8%
3. Accessing
Loans
Plans offering loans 72% 71% 69% 70% 69% 80%
Participants with an outstanding loan (when offered) 10% 9% 9% 8% 8% 15%
Recordkeeping assets borrowed 2% 1% 1% 1% 1% 1%
Withdrawals
Plans offering hardship withdrawals 86% 85% 84% 84% 85% 85%
Participants using withdrawals (when offered) 1% 1% 1% 1% 1% 3%
Recordkeeping assets withdrawn 1% 1% 1% 1% 1% 1%
Participant account balance withdrawn 40% 48% 48% 44% 38% 30%
Distributions and rollovers
Terminated participants preserving assets 87% 85% 87% 88% 87% 84%
Assets preserved that were available for distribution 96% 96% 96% 97% 97% 98%
* These figures are estimated for 2017 as the data required to compute them will not be available until December 2018.
Source: Vanguard, 2018.
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Vanguard Institutional Investor Group
P.O. Box 2900 Valley Forge, PA 19482-2900
© 2018 The Vanguard Group, Inc. All rights reserved.
HASVRPA 062018 DOLU 07122021
Connect with Vanguard® > institutional.vanguard.com > global.vanguard.com
(non-U.S. investors)
Acknowledgments
Launched in 2011, Vanguard Retirement Plan Access (VRPA) is a comprehensive service for retirement plans with up to $20-plus million in assets. Ascensus, Inc.— a nationally recognized recordkeeping firm—provides the administration of these plans on Vanguard’s behalf. Through VRPA, we served 8,900 plan sponsors with 370,000 participants as of year-end 2017.
We extend our thanks to the following individuals who made this publication possible:
Data analysisJohn A. Lamancusa (Vanguard)Edward Lukshides (Ascensus)
AuthorJean A. Young (Vanguard)
Vanguard research > Vanguard Center for Investor Research
Vanguard Investment Strategy Group
All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks.
Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.
Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility.
Investments in bonds are subject to interest rate, credit, and inflation risk.
High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings.
About the cover
The cover of How America Saves 2018 features a variety of well-known and distinctive buildings, structures, and landmarks from around the country. From left to right: Capitol Records Building (Los Angeles, California), Golden Gate Bridge (San Francisco, California), West Mitten Butte at Monument Valley Navajo Tribal Park (Arizona/Utah), Gateway Arch (St. Louis, Missouri), Space Needle (Seattle, Washington), Willis Tower (Chicago, Illinois), Washington Monument (Washington, D.C.), United States Capitol Building (Washington, D.C.), Liberty Bell (Philadelphia, Pennsylvania), Statue of Liberty (New York, New York), Empire State Building (New York, New York), Faneuil Hall (Boston, Massachusetts), Wright Flyer (Manteo, North Carolina), Leonard P. Zakim Bunker Hill Memorial Bridge (Boston, Massachusetts), and Portland Head Light (Cape Elizabeth, Maine).