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June 24, 2021 at 09:00 AM
What You Need to Know
- The report examines the overall performance of 401(k) plans for 27 industry verticals, across eight metrics.
- The performance of 401(k) plans can vary significantly by industry and company size.
- Overall, plan assets jumped 20% over the previous year.
The performance of 401(k) plans can vary significantly by industry and company size. Judy Diamond Associates, like ThinkAdvisor a business unit of ALM Media, recently compiled its fifth annual 401(k) Benchmark Report, which examines the overall performance of 401(k) plans for 27 industry verticals, across eight different performance metrics.
“For advisors, this report represents an opportunity to have a meaningful discussion with your clients about how their plans are doing,” said Eric Ryles, vice president of customer solutions for Judy Diamond Associates.
“For sponsors, these benchmarks provide an unbiased look into your industry and will help you determine if your plan is competitive within your peer group,” Ryles said. “It can also help ensure that you’re taking the right steps to provide positive retirement outcomes for your employees.”
Across all industries, plans gained about $1 trillion in value, representing a 20% jump in plan assets over the previous year.
Actual participation rates continue to hover at around 81%, taking a breather after several years of increases led by widespread adoption of automatic enrollment options.
Total contributions from both employees and employers increased by about 8% year over year, although because the median contributions show a slight decline, the data mean more people than ever are participating, although their savings rate remains about the same.
The report ranked industry groups by average account balance, participation rate, rate of return, employee contributions, employer contributions, plan score and employee longevity.
The top 10 industries for retirement plans include industries you’d expect to do well. However, the report’s insights into other industries might prove surprising, as might the performance metrics of a competitor’s plan.
Financial advice and investment activities. This group is notable for its extremely high employee and employer contribution rates, which makes sense given that the average pay for someone in this space is likely to be substantially more than most other industry groups.
Because most employer dollars contributed to a plan are structured as matches to the employee contributions, there is a strong correlation between those two data points.
Certified public accountants. The average account balance across all CPA firms is $126,614, putting them about $3,000 ahead of lawyers and $5,000 ahead of financial advisors. It should also come as no surprise that these firms enjoy some of the longest- tenured employees, highest over-plan health scores and most contributions per participant.
