DC Participants Continue Saving in Q1 2011

Participant withdrawal and contribution data indicate that essentially all defined contribution plan participants continued to save in their retirement plans at work in the first quarter of the year, according to the Investment Company Institute.

DC plan participants’ withdrawal activity during the first quarter of 2011 was in line with activity observed during the first quarter in the prior year, and a negligible share of participants stopped contributing during Q1 2011. In the same quarter, just over one percent of participants took withdrawals from their DC plan accounts, with 0.4% taking hardship withdrawals. These levels of activity are the same as observed in the first quarter of 2010, ICI said.   

In Q1 2011, only 1% of DC plan participants stopped contributing, compared with 1.1% in Q1 2010 and 2.7% in Q1 2009. It is possible that some of these participants stopped contributing because they reached the annual contribution limit, ICI noted.   

During the first three months of the year, 4.4% of DC plan participants had changed the asset allocation of their account balances, compared with 4% in Q1 2010 and 5.5% in 2009. Reallocation activity regarding contributions followed a similar pattern of activity, and 4.2% of DC plan participants changed the asset allocation of their contributions in Q1 2011.  

Loan activity edged back a bit in the first quarter, after rising since the end of 2008 and throughout 2010. This pattern of activity is similar to that observed in the wake of the bear market and recession earlier in the decade. The sample of recordkeepers reported that as of March 2011, 18% of DC plan participants had loans outstanding compared with 18.2% at year-end 2010.  

ICI reported that DC plan assets are a significant component of Americans’ retirement assets, representing more than one-quarter of the total retirement market and almost one-tenth of U.S. households’ aggregate financial assets at the end of the first quarter of 2011.  

The report was based on data from a cross section of recordkeeping firms representing a broad range of DC plans and covering nearly 24 million employer-based DC retirement plan participant accounts as of March 2011.  

The report is at http://www.ici.org/pdf/ppr_11_rec_survey-q1.pdf.