DC Plan Assets Continue to Grow At Large Companies

Defined contribution (DC) plans have grown to account for 46% of assets among U.S companies with more than $250 million in retirement plan assets.

According to a new study by Greenwich Associates, DC plans will continue to attract assets as companies continue to close their defined benefit pension plans to new employees.

Also affecting the picture is the fact that DC sponsors are putting in place effective practices, such as automatic enrollment and target-date investments, explained the company in a statement about the study.

In fact, more than one-third of U.S. DC plan sponsors are using automatic enrollment in their 401(k) plans, up from about a quarter of plans in 2006. Among plans with less than $250 million in assets, 36% have taken this step.

The percentage of large U.S. plan sponsors saying they offer target-date funds as an investment option in their 401(k) plans increased to almost 80% in 2007 from 60% the prior year. At the same time, the share of non-users saying they are seriously considering offering target-date funds in the next two years increased to 48% in 2007 from 36% in 2006.

Among companies with more than $250 million in DC plan assets, more than 30% now say they contribute to employees’ 401(k) plans even if participants do not make any contributions of their own.

The average allocation to international equities increased to 8.4% of DC plan assets in 2007 from 6% in 2006 among funds with more than $250 million in plan assets. Allocations among smaller funds increased to 9% of total assets from 8%.