Much in the same way the wealthiest 1% of Americans hold a disproportionate share of the country’s riches, the top 1% of 401(k) plans owns a lopsided proportion of defined contribution retirement assets.
Of the 540,000 active 401(k) plans as of the end of last year, 5,400, or 1% of sponsoring employers, held $3.06 trillion, or 71% of all assets, according to an analysis from Judy Diamond Associates, a provider of data and analytics tools for retirement advisors and plan sponsors.
That the largest employers are dominant is not surprising, given that they employ the majority of Americans enrolled in retirement plans. The largest employers claim 45 million participants, or 56% of all enrollees. The balance, meaning that 99%, have 35 million participants, or 44% of all enrollees in defined contribution plans.
Nonetheless, the asset ratio is still significantly out of balance in favor of larger firms.
“The market is extraordinarily top-heavy,” said Eric Ryles, managing director of Judy Diamond, which is owned by the same parent company as BenefitsPro.
Overall, there is $4.3 trillion in 401(k) plans. With the bulk of those assets in plans at the top 1%, 534,000 employers are left to hold $1.25 trillion.
The disparity is even more dramatic when narrowing things down to the nation’s 500 largest sponsors. Those plans hold $1.9 trillion, more than the plans in the 99% segment.
Ryles thinks this has ramifications for all plans.