Americans Like DC Arrangements

Americans tend to view defined contribution (DC) retirement accounts favorably, and they like the way DC contributions and withdrawals are taxed, research shows.

Nearly two-thirds of U.S. households view defined contribution retirement accounts favorably, according to results from a recent survey published by the Investment Company Institute (ICI). Along with strong favorability marks, U.S. households also expressed support for the key features of DC plans—results that are consistent with previous years’ findings.

“Our survey found strongly positive views of U.S. households toward the DC plan system, even in cases in which no one in the household was invested in a retirement plan,” says Sarah Holden, senior director of retirement and investor research for ICI. 

ICI’s report, “Americans’ Views on Defined Contribution Plan Saving,” is based on survey results from respondents in November and December 2013 about their views on DC retirement account saving and their confidence in 401(k) and other DC plan accounts.

Survey results show that a strong majority (90%) of account-owning households appreciate the payroll deduction features of qualified DC arrangements. Nine in 10 account-owning households also like having control of investment choices within a DC plan; the same number agreed that these plans help them to think about the long term.

The survey also revealed substantial support for the current tax treatment of retirement plans. A strong majority of U.S. households—including those with and those without retirement plan accounts—disagree with the notion of changing the current tax treatment of DC accounts to remove or reduce tax incentives for retirement savings. The survey found:

  • Eighty-six percent of households disagreed that the government should take away the tax advantages of DC accounts, and 83% disagreed with reducing the amount that individuals can contribute to DC accounts.
  • Among households not owning DC accounts or individual retirement accounts (IRAs), 81% rejected the idea of taking away the tax treatment of DC accounts.
  • Eighty-six percent of households overall disagreed with a proposal that individuals not be allowed to make investment decisions in their DC accounts, and more than eight in 10 disagreed with replacing all retirement accounts with a government bond. 

U.S. households generally, whether they owned a retirement account or not, also expressed confidence in DC plans’ ability to help individuals meet their retirement goals. More than eight in 10 households owning DC accounts or IRAs indicated such confidence. This measure of confidence was only slightly less evident—nearly two-thirds of households—among households without a DC account or IRA.

More on the ICI survey results is available here.