Annual Survey of Defined Contribution Plans Highlights Asset Allocation Trends

Defined Contribution PlansAt the end of 2011, 61 percent of 401(k) assets were invested in equities through equity funds, the equity portion of balanced funds, and company stock, down slightly from 62 percent the prior year, the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) found in their annual survey of assets in defined contribution plans.

According to the survey, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2011,” 34 percent of assets were in fixed-income securities such as stable-value investments and bond and money funds. At the end of 2010, 33 percent of assets were invested in fixed-income securities.

Released every December, the survey assesses asset allocations in defined contribution plans. It is conducted by EBRI and ICI, which jointly operate the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, the largest repository of information about individual 401(k) plan participant accounts. As of December 31, 2011, the EBRI/ICI database included statistical information about 24 million 401(k) plan participants in more than 64,000 employer-sponsored plans with $1.415 trillion in assets.

The survey also found that 72 percent of 401(k) plans included target-date funds in their investment lineup at year-end 2011. Some 13 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and 39 percent of 401(k) participants held target-date funds.

A higher percentage of new and recent hires than in the past tended toward balanced and target-date funds. At year-end 2011, 51 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 44 percent in 2010, and about 7 percent in 1998.

At year-end 2011, 40 percent of the account balances of recently hired participants in their 20s were invested in target-date funds, compared with 35 percent at year-end 2010.

401(k) participants continued to seek diversification of their investments. The share of 401(k) accounts invested in company stock remained at 8 percent in 2011. This share has fallen by more than half since 1999. Recently hired 401(k) participants contributed to this trend, tending to be less likely to hold employer stock.