Just-released analysis by Judy Diamond Associates shows that the top 1% of plans hold 71.1% of all 401(k) assets — giving large employers an “outsized influence” on the retirement market, according to managing director Eric Ryles.
Judy Diamond’s research found that while there were approximately 500,000 active 401(k) plans in the fourth quarter of 2013, with a collective $3.5 trillion in total assets, nearly three-quarters, or $2.54 trillion, was controlled by the top 1% (5,000 companies).
The other 99%, or 495,000 companies, of all 401(k) plans nationwide control only 29% of the total assets.
Judy Diamond’s research showed that fewer than two-tenths of 1% of 401(k) plan sponsors are responsible for fully half of the nation’s 401(k) retirement plan assets. “That’s only 630 very large companies controlling $1.75 trillion in assets,” Ryles says.
Indeed, one “needn’t look any further than the rise of target-date funds to see the influence of the top 1%,” Ryles told ThinkAdvisor. “The Pension Protection Act of 2006 allowed 401(k) plans to embrace target-date funds” as a qualified default investment alternative (QDIA), “and early adoption by the 1% led to an explosion in popularity.”
The investment options that large plan sponsors choose to make available to their participants “set the agenda for smaller companies to follow suit,” he says.