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How DC Plan Participants Behaved in First Half of 2017: ICI

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Nearly all defined contribution plan participants continued contributing to their plans in the first half of 2017, according to ICI’s “Defined Contribution Plan Participants’ Activities, First Half 2017.” 

Defined contribution plan assets are a significant component of Americans’ retirement assets, representing 28% of the total retirement market and almost one-tenth of US households’ aggregate financial assets at the end of the second quarter of 2017.

The broad scope of ICI’s recordkeeper survey – which is based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans – provides insights about recent withdrawal, contribution, asset allocation and loan decisions of participants in these plans.

The latest recordkeeper data indicates only 1.6% of DC plan participants stopped contributing during this period, compared with 1.9% in the first half of 2016.

“It is possible that some of these participants stopped contributing simply because they reached the annual contribution limit,” according to the report.

The survey of recordkeeping firms also gathered information about asset allocation changes in DC account balances or contributions, and found that most DC plan participants stayed the course in their asset allocations.

In the first half of 2017, 6.8% of DC plan participants changed the asset allocation of their account balances, and 4.3% changed the asset allocation of their contributions.

According to the survey, account balance reallocation activity was little changed, and contribution reallocation activity was slightly lower compared with the activity observed in the same time frame in 2016.

Withdrawal activity for DC plans also remained low in the first half of 2017, the survey found. In the first half of 2017, 2.2% of DC plan participants took withdrawals, about the same share as in the first half of 2016. Levels of hardship withdrawal activity also were low, with only 0.9% of DC plan participants taking hardship withdrawals during the first half of the year, similar to the first half of 2016.

DC plan participants’ loan activity was little changed at the end of the first half of 2017, according to the survey. 

At the end of June 2017, 16.7% of DC plan participants had loans outstanding, compared with 16.6% at the end of the first quarter of 2017. Loan activity continues to remain higher than at the end of 2008, when 15.3% of DC plan participants had loans outstanding.

“Two factors appear to influence DC plan participants’ loan activity: reaction to financial stresses and a seasonal pattern,” the report says.

According to the survey, the first quarter of the year tends to have lower percentages of DC plan participants with loans outstanding compared with later quarters.

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