DC Assets Remain Highly Concentrated With Mega Sponsors

A recent Judy Diamond Associates analysis finds the largest 1% of 401(k) retirement plans holds 71% of all 401(k) assets nationwide.

Judy Diamond finds there were approximately 540,000 active 401(k) plans at the end of 2014, with a collective $4.3 trillion in total assets. Much of this money is held by about 5,400 defined contribution (DC) retirement plans that make up the top 1% of plans by assets, the analysis shows. In contrast, the other 534,600 companies offering 401(k) plans in the U.S. control just 29% of the total assets.

“These findings actually mirror our research from last year,” says Eric Ryles, managing director of the company. “Then, as now, 71% of the country’s 401(k) assets were in the hands of 1% of its employers. If you dial down even further, to just the top 500 companies [by assets], the figure is still an enormous $1.9 trillion dollars.”

Ryles says this figure implies some 500 investment committees have as much collective influence, in dollar terms, as the next 500,000 committees combined.

“What’s so very interesting about this is that you’ve got 500 investment committees who are, essentially, dictating trends in retirement savings that can’t help but influence the rest of the market,” he notes. “That’s an enormous amount of influence concentrated in a very small number of hands.”

Although larger firms employ a greater population of the American work force than small firms, the asset ratio is still significantly out of balance in favor of the large firms, Judy Diamond finds. For example, the top 1% of plans provides retirement coverage to only 56% of workers eligible for a 401(k) plan in the U.S.—yet they control 71% of the assets. The other 99% of plans serve 44% of the remaining eligible participant population, who hold just 29% of the total industry assets.

Judy Diamond based its research on the most recently available 401(k) plan disclosure documents released by the U.S. Department of Labor (DOL). For the study, only active 401(k) plans with more than $3,000 in total plan assets were considered.