Close Close

Retirement Planning > Saving for Retirement

More participants, higher contributions, fewer DC plans

Your article was successfully shared with the contacts you provided.

The number of defined contribution plans nationally fell in 2012, although the total number of participants, and their contributions, grew, according to a newly released analysis of Form 5500 data. 

The analysis by the Employee Benefits Security Administration division of the Department of Labor shows there were 632,970 DC plans that year, the latest for which data was available. 

That’s down from the 638,390 plans recorded in 2011 and even further from the 669,157 in 2008. The financial crisis set off a streak of four consecutive years in declines in the total number of DC plans. 

The EBSA data shows that the decline began even before the Great Recession, a time marked by corporate bankruptcies and business closures. 

In 2000, there were 686,878 DC plans, a historical high. By 2003, the number had fallen to 652,976 and by 2004 to 635,567. 

But the 2012 decline in DC plans (0.8 percent from 2011) is offset by the fact that the total number of participants increased by 2.5 percent. About 75.5 million people participated in DC plans in 2012, up from 73.7 million the previous year. 

What happened? The data shows that larger plans got even larger, while smaller businesses were pulling back. 

There were 76,320 DC plans with more than 100 participants in 2012. That was an increase of 1,000 plans over the previous year. 

On the other hand, smaller employers were pulling out of the DC market. In 2012, there were 556,650 DC plans with fewer than 100 participants, down by about 6,500 plans from 2011.

Year-over-year data since 2000 has mostly shown declines in the number of plans offered with fewer than 100 participants, with a small exception in increases in the two years preceding the 2008 financial crisis. 

In 2000, there were 629,245 plans with fewer than 100 participants, more DC plans than have ever been offered to small-business employees. 

The diminishing access to retirement plans in smaller businesses is likely to be ammunition for those who argue the 401(k)-based system needs an overhaul. 

Also notable in the review of 2012 Form 5500s is the continued preference of the 401(k) model in the defined contribution world. 401(k)s represent the vast majority of defined contribution plans, and while total DC plans decreased in 2012, 401(k) plans grew by about 3,000 plans, to 516,346 plans. 

Also, in the vast majority of 401(k) plans (87.8 percent), the participant directs all of the investments made, according to the EBSA analysis. 

Participants direct part of their contributions in about 16,000 plans. In about 47,000 plans, participants don’t control how their contributions are invested at all. 

Perhaps the best news to be taken from the analysis of 2012 Form 5500s is the increase in contributions by DC plan participants. 

Contributions came to $352.8 billion in 2012, a 6.9 percent increase from 2011, and the most ever recorded. 

As a historical reference, contributions in 2008 were almost $312 billion, before the effects of the Great Recession on unemployment had fully set in. 

Meanwhile, few will be surprised by the news that the number of active participants in defined benefit plans decreased again in 2012 — for the 13th straight year. 

The number of DB plans decreased by 3.4 percent from the previous year, and the number of active participants in DB plans decreased by 4.2 percent. 

DB plans also continued to pay out more money than they took in. They disbursed $199 billion but took in $70.4 billion less than they collected.

DC plans, by comparison, took in $19 billion more in contributions than distributions, though distributions rose 11.5 percent to $333.9 billion.