Mercer Data Indicates Auto Plan Features Lead to Higher Balances

An analysis of Mercer’s database of 1.2 million defined contribution plan participants suggests that participants who utilized automatic rebalancing and automatic deferral increase during the recent market downturns realized greater account balance increases.

Data from October 2008 through April 2010shows the average account balance increase for all participants was 34%, while the average increase for participants deferring into their plan and who made a deferral increase was 43%. Participants who used the automatic rebalancing feature saw an average increase of 47% during this time period, according to a Mercer news release.  

Deferring participants who utilized automatic deferral increase and automatic rebalancing saw an average account balance increase of 60%.  

In addition, those participants who made an account exchange during the same period did slightly worse than those who did not – an average account balance increase of 30% versus 35%,respectively.    

Currently, 81% of Mercer’s clients offer an automatic rebalance feature in their plan, and 77% of the clients for which Mercer tracks deferral rates offer a systematic deferral increase feature.  

The analysis excluded any participants who took a withdrawal or loan from their account during the time period.