BMO Offers Data to Help Advisers and Sponsors Benchmark Plans

The aim is to help advisers have more nuanced conversations with their clients and for sponsors to see how they compare to other companies in their industry.

BMO Global Asset Management has created a report filled with data on defined contribution plans to help advisers and sponsors benchmark their plans. The aim is to help advisers have better conversations with their clients.

The information shows minimum age requirements for plan eligibility by plan size, participation rates by plan size for the years between 2008 and 2015, participation rates by age in plans with automatic enrollment and without, and participation rates by salary. Not surprisingly, in plans without automatic enrollment, the participation rate for people making less than $30,000 a year is only 29%. However, 85% of those making $100,000 or more a year voluntarily participate in their plan.

BMO also shows participation rates by years of service, participation rates by industry between the years of 2011 and 2015, and the percentage of plans with automatic enrollment by number of employees between the years of 2005 and 2015. In 2005, among plans of all sizes, only 25% automatically enrolled participants. By 2015, that had grown to 58%. The charts also show the percentage of plans with automatic enrollment by industry between the years 2011 and 2015. The industry with the highest usage of automatic enrollment in 2015 was non-durable goods manufacturing.

BMO also gives the default deferral percentage of pay in plans with automatic enrollment between 2006 and 2015. The most common rate in 2015 was 3%. Employer matches have grown from 40% of plans in 2010 to 49% in 2015. BMO also shows the average matching contributions by industry type and the percentage of pay matched by industry type between 2007 and 2015.

The research gives the average deferral rate by industry sector between 2010 and 2015. For industries of all types, the average deferral rate in 2015 was 6.8%. By salary, the average deferral rate for those making less than $30,000 in 2015 was 4.4%, but 8.8% for those in the $100,000-plus income bracket.

NEXT: Account balances

Looking at account balances, in 2015, 75% of plans had participants with average balances under $100,000, with 33% of those under $10,000. Only 25% of plans had people with balances of $100,000 or more on average. Among those under the age of 25, the average account balance was $4,048, but for those 65 or older, it was $200,358.

BMO also reviews account balances by job tenure. For those in their place of employ for less than two years, it averaged $10,247. However, for those who had been there for a decade or more, it was $185,575.

By industry type, agriculture, mining and construction companies had the highest average balance, $222,084. Education and health care companies had the lowest, $64,565. Lifecycle and target-date funds are the most commonly used default investments, used by 79% of plans in 2015, up from 49% in 2007.

The total plan cost in 2015 averaged 1.5%. However, for plans with $10 million or less in assets, it averaged 1.71%. The fees continued to decrease as plan size increased, with plans with more than $1 billion in assets averaging 0.51% in fees.

The 46-page BMO report, “DC Conversations: An Industry Assessment of Defined Contribution Plans,” can be downloaded here.