The top five states with the strongest relative growth in new 401(k) plans – a good indicator of economic growth – are mostly found in the West, according to research by Judy Diamond Associates.
The national retirement plan data publisher, a unit of BenefitPro’s parent company, Summit Professional Networks, found that Arizona led the way, with 7.22 percent growth in the total number of 401(k) plans in the state.
“New 401(k) plans are strong indicators of the creation of entirely new businesses or businesses that have reached a level of success where they can begin to offer their employees more and better benefits,” said Eric Ryles, managing director of Judy Diamond.
Ryles added that states with the greatest ratio of new 401(k) plans also are likely those with favorable small business environments.
Judy Diamond looked at the number of newly initiated 401(k) plans in 2012, the most recent year for which a complete set of data was available. The 24,127 new plans included in the study covered 443,969 participants.
“The median participation rate for these new plans was 89 percent, which suggests that a lot of these new plans are taking advantage of automatic enrollment features, which have been available to plan sponsors for almost a decade as a result of the Pension Protection Act,” Ryles said.
“Since our previous research has shown that participation rate is the single most important factor in achieving a positive retirement outcome, this figure is tremendously encouraging. It was also nice to see that nearly two-thirds of these employers contributed some amount to the plan on behalf of the employees.”
The analysis found that participants in the new plans contributed an average of $1,769 each to their accounts, while employers added an average contribution of $1,091 per participant.
Judy Diamond is the leading provider of sales prospecting and plan analysis tools for benefits brokers, financial advisors, plan providers, and carriers serving the employee benefits and retirement markets. It offers access to 5500 plan data through its Retirement Plan Prospector database.
The top five states with growth in new 401(k) plans are:
No. 1: Arizona
Total 401(k) plans: 6,800
New 401(k) plans: 491
Percent of new plans: 7.22
No. 2: Colorado
Total 401(k) plans: 8,427
New 401(k) plans: 600
Percent of new plans: 7.12
No. 3: Wyoming
Total 401(k) plans: 722
New 401(k) plans: 50
Percent of new plans: 6.93
No. 4: California
Total 401(k) plans: 61,047
New 401(k) plans: 4,036
Percent of new plans: 6.61
No. 5: Florida
Total 401(k) plans: 21,584
New 401(k) plans: 1,420
Percent of new plans: 6.58
See also: Top 10 states with fastest 401(k) growth