hewitt benchmarks

How Well Are Employees Saving and Investing in 401(k) Plans2010 Hewitt Universe Benchmarks

Survey Findings

Hewitt Associates B 2010 Hewitt Universe Benchmarks

PurposeThe 2010 Hewitt Universe Benchmarks—How Well Are Employees Saving and Investing in 401(k) Plans research report analyzes the quality of participation, plan balances, investment behavior, account activity, and demographics of over 2.9 million employees eligible for defined contribution plans. Participant behavior is generalized by separating employees into demographic groups that include age, salary, tenure, balance, and gender.

The result is a comprehensive study that can be used by plan sponsors:

As a benchmark—Plan sponsors can learn how their workers’ saving and investing behavior compares to that of the average worker.

To shape plan structure—By understanding general patterns of participant behavior across demographic groups, plan sponsors can better determine who might benefit from certain plan features, and how to best structure such features for optimal results.

For targeting communication—Demographic analysis helps plan sponsors pinpoint which groups of workers require certain communication or education about the 401(k) plan.

BackgroundThis analysis examines the saving and investment behavior of more than 2.9 million eligible employees and more than 2.0 million active participants based on empirical data across nearly 120 large defined contribution plans, with an average of 24,000 eligible employees per plan.

Most of the plans covered in the analysis offered some sort of matching contribution in 2009, while about half allowed after tax contributions.

From an investment perspective, on average, 19 funds were offered to participants (including premixed portfolios). Fifty-eight percent of plans offered company stock as an investment option. Eighty-six percent offered premixed portfolios, including target date and target risk funds. Further, 24% of plans offered a self directed brokerage account option (SDBAs).

The average eligible employee in the resulting analysis is 42 years of age, earns an annual salary of $54,000, and has approximately nine years of tenure with his or her employer.

About This Material

Overview of Findings 2

Participation and Savings Rates 8

Plan Balances and Participant Returns 16

Investment Behavior 20

Account Activity 30

Demographics 34

Definitions and Terminology 38

Contents

Hewitt Associates 2 2010 Hewitt Universe Benchmarks

The year 2009 stood in stark contrast to 2008 as the markets rebounded and the economy began to recover. This analysis summarizes the year in participant savings behavior and its implications across the defined contribution industry. The report covers the saving and investing behavior of 2.9 million employees.

Quality of ParticipationAmid the market volatility during 2008 and 2009, participation rates in 401(k) plans remained flat at around 74%. Although nearly 4% of savers dropped out during the year, many new hires were defaulted into a 401(k) plan, and this offset the decline.

Average before-tax contribution rates were nearly unchanged from 2008, at 7.3% of pay. However, rates were still slightly lower than they were at the end of 2007 (7.7%), before the financial crisis began.

Automatic enrollment and inertia drove positive employee saving behavior. On average, employees subject to automatic enrollment had a participation rate of 86.2%, 21 percentage points higher than those without automatic enrollment. Contribution rates among both populations were similar, dispelling some concerns that automation may hurt the quality of participation.

While automation clearly helped improve employee participation, on average, younger, lower-tenured, and lower-salaried workers remained less likely to save. Further, this group was most apt to contribute at lower rates and miss out on employer matching

contributions. In fact, 40.8% of workers in their 20s did not contribute enough to receive the full employer match. In total, 28.2% of all participants contributed below the company match threshold.

Total contributions into defined contribution plans, including employee and employer contributions, comprised nearly 10.2% of pay, with 3.5% coming from employer contributions during the year.

Overview of Findings

Key Findings:

The average plan participation rate ▪was flat for 2009, at nearly 74%.

Employees subject to automatic ▪enrollment had an average participation rate of 86.2%—21% higher than those without automatic enrollment.

The average before-tax contribution rate ▪election was unchanged at 7.3% in 2009.

28.2% of participants contributed ▪below the company match threshold.

Cumulatively, participants saved ▪10.2% of pay, including 3.5% from employer contributions.


Plan Balances and Participant Returns In stark contrast to 2008 when the median return was −28.3%, the median rate earned by participants in 2009 was 24.3%. Nearly all participants had positive returns, with the majority (61%) gaining more than 20%. Participants who experienced the largest losses during 2008 had the highest returns during 2009. In addition, participants with some or all of their balances invested in premixed portfolios had stronger results than those who did not.

Market returns significantly propelled 401(k) balance growth. The average participant’s total plan balance was $70,970 at the end of 2009, up significantly from $57,150 in 2008 but lower than the 2007 level of $79,570. However, looking at a constant participant base, thus excluding new enrollees, balances rose 8% from 2007 to 2009. Younger workers experienced a larger rebound due to the impact of new employee/employer contributions.

Investment BehaviorParticipants’ asset allocation shifted throughout the year primarily due to automation and participant inaction. Overall equity exposure increased

substantially, and the use of premixed portfolios also rose. Two views of asset allocation are reviewed—equally weighted by participant, and asset-weighted. Both examinations illustrate substantial change.

Due mainly to strong market returns, the average participant’s overall allocation to equities was 66.9% in 2009, up from 59.0% in 2008 and very close to the average in 2007 (67.7%). Younger participants had the greatest increase in equity exposure due to the market movement and the increasing adoption of premixed portfolios.

The equally weighted asset allocation illustrates continued shifts in asset class allocations. Premixed portfolios, including target-date and target-risk funds, gained substantial ground driven by target-date usage. The average portfolio held 24.7% of assets in this asset class by the end of 2009 (up nearly 2% from 2008 and 8% from 2007). Due primarily to the market rebound, the allocation to GIC/stable value declined by 3.3% to 17.1%, on average. The allocation to large U.S. equity remained in third place at 15.3%, on average—nearly unchanged from the previous year. The average company stock allocation increased by 3.7% due to market movement.

Changes in asset-weighted allocations were heavily influenced by participants with larger balances. The biggest change in 2009 appeared in GIC/stable value—holdings were down 4.8 percentage points from 2008. On the other hand, the allocation to large U.S. equity was up slightly, as were premixed portfolios, emerging markets, and company stock asset classes.

Allocations to premixed portfolios have grown due to the increase in their availability, as well as the use of these funds as investment defaults under automatic enrollment. As indicated above, by the end

Key Findings:

The median rate of return earned by ▪participants in 2009 was 24.3%, a dramatic improvement on the median loss of 28.3% experienced during 2008.

The average participant’s balance was ▪$70,970 at the end of 2009, up significantly from $57,150 in 2008 but still lower than they were in 2007 ($79,570).


of 2009 the average participant allocated 24.7% of his/her assets to a premixed portfolio. From a popularity perspective, when available in the plan, 51.2% of participants had an allocation to premixed portfolios (up from 49.6% in 2008). Due primarily to automation, younger and lower-tenured participants were most likely to use premixed portfolios and also experienced the largest increases in usage.

The quality of the participant use of premixed portfolios has continued to improve. In 2009, 42% of participants who held premixed portfolios invested all of their diversified 401(k) balances in the premixed portfolio they selected, an increase of 7 percentage points from 2008. Target-date funds were used more often as a turnkey solution than target-risk funds.

Account ActivityDespite the extreme market volatility in 2009, only 16.2% of participants made any sort of fund transfer during the year. This was down significantly from 19.6% in 2008.

In terms of loan usage, 25.6% of active participants had a loan outstanding at the end of 2009, which was up slightly from 2008 (23.1%). Middle aged and middle income participants were most likely to have outstanding loans. Participants taking loans, on average, had slightly lower contribution rates than participants who did not.

During 2009, 7.1% of participants took a withdrawal, which was slightly higher than 2008 (5.9%) and the highest level in the history of the Universe Benchmarks reports. Among the total, 20% of all withdrawals were hardship withdrawals. Both nonhardship and hardship withdrawals were up in 2009.

Overview of Findings (continued)

Key Findings:

The three largest asset class exposures ▪equally weighted were: premixed portfolios (24.7%), GIC/stable value (17.1%), and large U.S. equity (15.3%). Significant increases were seen in premixed portfolio allocations, while GIC/stable value declined and large U.S. equity was flat.

The average participant’s overall ▪allocation to equities rose to 66.9% in 2009, up from 59.0% in 2008.

When available, 51.2% of participants ▪invested in premixed portfolios. Quality of use also improved with 42% of these participants fully invested in a single portfolio. Target-date portfolios were more likely to be used as a turnkey solution than target-risk funds.

Key Findings:

Only 16.2% of participants transferred ▪any funds during the year. Higher salary, higher balance, and male participants were more likely to transfer assets.

25.6% of active participants had a loan ▪outstanding, consistent with previous years.

7.1% of participants took a withdrawal ▪in 2009. Both nonhardship and hardship withdrawals increased from 2008.


ConclusionsDue to increased automation and participant inertia, participation and savings rates remained steady through the market downturn in 2008 and into 2009. The market rebound in 2009 significantly boosted balances, however, not enough to completely offset losses. Participants who experienced the largest losses in 2008 commensurately had the highest returns in 2009. Primarily due to market movement, participants’ average equity allocation grew to predownturn levels.

While there is some good news to be gleaned from participant behavior in 2008 and 2009, there remains significant room for improvement as we help workers meet their long-term retirement goals. To better assist participants, the following concepts should be considered:

Continue to use automation in conjunction ▪with more robust defaults.

Combining automatic enrollment with —automatic contribution escalation and target-date portfolios can yield strong results.

Default participants at contribution levels —equal to or greater than the employer-match rate to ensure better outcomes.

Consider back-sweeping participants to —help existing workers get on track.

Use different communication techniques ▪to engage employees in a dialogue.

Use more personalized, targeted —messages to elicit better responses.

Adjust messaging to reflect diversity —of population—remember, most participants are not the “average.”

Continue to work with participants ▪to create an investment plan.

Default participants into target-date portfolios. —

Add multiple investment supporting tools —such as target-date portfolios, advice, guidance, and managed accounts. Different services are necessary to meet a broad array of employee needs.

Adopt automatic rebalancing for “do-it- —yourselfers,” and periodically send reminders of tools to call existing workers’ attention to the services available to them.


Participation

Average Participation Rate—73.7%

Plan participation is one of the most important measures of the successfulness of a 401(k) plan. On average, 73.7% of eligible employees participated in their defined contribution plan in 2009, nearly unchanged since 2007.

In the past two years however, a larger number of participants have opted to stop saving (approximately four to five percent). However, participation rates were supported by automatic enrollment adoption, which spurred higher rates and offset the loss of savers.

Participation—By Tenure, Age, and SalaryLower-tenured workers continued to have participation rates below that of the broader universe. Only 35.9% of eligible employees with less than one year of tenure and 53.6% of those with one to two years of tenure made any contribution to their 401(k) plan in 2009.

Younger employees who are farther from retirement are much less likely to participate in their 401(k)

plan than workers who are closer to retirement. Slightly more than half of the employees age 20 to 29 actively participated in their 401(k) plans in 2009.

Not surprisingly, low-wage employees are less apt to save than their higher-wage counterparts. Employees earning less than $40,000 annually participated at below-average rates regardless of their age. In contrast, participation rates among those earning $40,000 to $59,999 jumped to 82.4%, on average. In fact, all age groups had a

Participation and Savings Rates

80%

70%

60%

50%

40%20092008200720062005

Participation Rates—Trend over Time

73.7%74.2%71.6% 73.9%

67.2%

Participation Rates—by Tenure

20%

40%

60%

80%

100%

30+20-3010-206-105-64-53-42-31-20-1

53.6%61.1%

66.6%70.7%72.8%76.2%

82.5%87.7% 87.3%

35.9%

Participation Rates—by Age

Age Participation Rate

20-29 51.7%

30-39 70.1%

40-49 74.9%

50-59 77.0%

60+ 69.8%

Participation Rates—by Salary

Salary Participation Rate

<$20,000 35.2%

$20,000-$39,999 66.4%

$40,000-$59,999 82.4%

$60,000-$79,999 89.5%

$80,000-$99,999 91.8%

$100,000+ 91.4%


participation rate above 80%, regardless of their age (even the youngest employees in their 20s), when their salaries were above $40,000 a year.

Participation—the Impact of Automatic EnrollmentOn average, participants subject to automatic enrollment had a participation rate of 86.2%, twenty-one percentage points higher than those without automatic enrollment. In plans where automatic enrollment is utilized, nearly half of the new enrollments in 2009 enrolled via the defaults (versus proactively enrolling).

A significant benefit was witnessed across all demographics—by tenure, age, and salary. Among 20 to 29 year olds, participants subject to automatic enrollment had an average participation rate of 85%, dramatically higher than the broader group at 51.7%. When viewed by tenure, participation rates among those who are subject to automatic enrollment is consistently high, regardless of tenure. Each group had a participation rate in excess of 80% due to low opt out rates. For employees with less than one year of tenure, participation

rates were 61 percentage points higher for employees subject to automatic enrollment.

Participation—By IndustryParticipation rates among industries continued to vary significantly. Industries with larger populations of lower paid workers tended to have the lowest participation rates. For example, only about half of the employees in the retail industry enrolled in their company 401(k) plan. On the other

hand, industries with higher salaried or longer tenured workers, such as electronics/electrical and computer services/software industries, had average participation rates of 90% or higher.

Participation Rates—by Tenure of Participants Subject vsNot Subject to Automatic Enrollment

0%

20%

40%

60%

80%

100%

30+20-3010-206-105-64-53-42-31-20-1

No A.E.Subject to A.E.

19%

38%

50%

60%66%

70% 74%82%

88%89%88%89%89%89%87%80%

88% 87%

90% 88%

Participation Rates—by Industry

Industry Participation Rate

Banking/Finance 70.4%

Chemicals 77.0%

Computers/Software/Professional Services 86.6%

Computers/Office Equipment 71.5%

Consumer/Misc Product Mfg. 76.7%

Diversified Manufacturing 82.8%

Electronics/Electrical 90.2%

Entertainment/Publishing/Printing 67.6%

Food & Beverage 78.6%

Health Care/Medical Services 68.4%

Insurance 85.6%

Retail (incldg. wholesale & distribution) 50.6%

Telecommunications 67.4%

Utilities/Energy 81.9%


Contribution Levels

Average Before-Tax Contribution Level— 7.3% of Pay

In 2009, average before-tax contribution rates were nearly unchanged from 2008, at 7.3% of pay. However, it was still down slightly from end of 2007, before the financial crisis. The marginal changes during the decade are due to participants’ reaction to the downturn, as well as the increasing adoption of automatic enrollments, coinciding with relatively lower default savings rates.

In total, nearly 30% of employees contributed in a nominal way to their 401(k) plan—deferring just 1% to 4% of pay on a before-tax basis. In comparison, only 15.8% of participants contributed more than ten percent of their pay in 2009, down just slightly from 2008 levels.

Reviewing changes in contribution rates, more workers increased than decreased their savings rates during the year. In total 11% of participants reduced their contribution in 2009, while 19% increased their contribution rate. However, similar to trends in 2008, the magnitude of the declines, on average, substantially exceeded the rate of increases. The average decrease was 5.5%, while the average increase was only 3.5%. As a result, overall the savings rates for the year remained nearly unchanged.

Contribution Levels—By Tenure, Age, and SalaryIn general, younger participants saved at much lower rates than workers who were closer to retirement. The average participant aged 20–29 who contributed in 2009 saved at a rate of 5.3%. Comparatively, participants aged 50 or older, on average, contributed 8.9% of pay, which was boosted somewhat by catch-up

33.4%

21.7%

15.8%

29.1%

0%

10%

20%

30%

40%

11%+7-10%5-6%1-4%

Distribution of Before-Tax Contribution Rates

5.3%

6.5%

7.4%

8.7%

9.4%

0%

2%

4%

6%

8%

10%

60+50s40s30s20s

Average Before-Tax Contribution Rate—by Age

7.9% 7.9%

7.7%

7.4%7.3%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

20092008200720062005

Average Before-Tax Contribution Rate—Trend over Time

Participation and Savings Rates (continued)


contributions—12% of these workers made catch-up contributions (when available).

Just as they participate at lower rates, lower salaried employees also contribute at lower rates. The demographic group with the lowest contribution levels includes employees in their 20s who earn less than $40,000 annually. Regardless of age, participants earning $60,000 or more annually contribute at above-average levels—including those in their 20s.

Contribution Rate ChangesIn terms of contribution rate changes in 2009, 26.9% of participants changed their contribution rate, which is on par with previous years. Overall, a higher percentage of participants increased (19.0%) their contribution rates than decreased (11.2%) their contribution rate during the year. However, the magnitude of the increases (3.5%) were much smaller than the decreases (5.5%)

Younger participants were most apt to change their contribution rates. About 13% of savers aged 20 to 39 decreased their contribution rates during 2009. Among this group, 5% stopped contributing completely. On the other hand, 21% increased their contribution rate, which left overall savings rates flat for this demographic.

Average Before-Tax Contribution Rate—by Salary

0 2 4 6 8 10 12

$100k+ 10.5%

$80-$99k 9.5%

$60-$79k 8.4%

$40-$59k 6.9%

$20-$39k 5.3%

23.6%

19.7%18.5%

17.5%

14.2%

0%

5%

10%

15%

20%

25%

0%

2%

4%

6%

8%

10%

60+50-5940-4930-3920-29

Contribution Rate Increases—by Age

Ppts Decreasing Rates Amount of Decrease

0%60+50s40s30s20s

0%

2%

4%

6%

8%

10%

Contribution Rate Decreases—by Age

Ppts Decreasing Rates Amount of Decrease

2%

4%

6%

8%

10%

12%

14%12.9% 13.0%

11.2%

9.4%

7.2%


Employer Match ThresholdAnother way to measure the quality of participation is gauging whether employees fully benefit from employer matching contribution dollars. In 2009, 28.2% of participants contributed below the company match threshold, nearly identical to 2008 (28.4%). Notably, 33.4% of participants contributed precisely at the match threshold (the most popular matching formula is at six percent). The remaining 38.4% of participants contributed above the match threshold, this is down from last year (40.7%).

As expected, younger, lower-tenured and lower-salaried participants were most apt to contribute at lower rates, and miss out on matching contributions. Of those workers aged 20–29, 40.8% failed to obtain the full employer match and left money on the table. Nearly 80% of those earning less than $40,000 contributed below, or only at the match threshold.

Roth Contributions

Participation in Roth Plan— 7.4% of ParticipantsAverage Roth Contribution Level— 6.8% of Pay

Approximately 30% of plans offer Roth 401(k) functionality, thus allowing participants to contribute on an after-tax basis, as well as pre-tax. By the end of 2009, 7.4% of the active participants (6% of the entire eligible population) elected to save via a Roth 401(k) when it was available. The average Roth contribution rate was 6.8%.

When considering Roth 401(k) utilization only among newly enrolled 401(k) participants, we found that across all companies, nearly 13% of those enrolling contributed to the Roth 401(k) when it was available. This is substantially higher than the adoption

40%

30%

20%

10%

0%Above Match

ThresholdAt MatchThreshold

Below MatchThreshold

28.2%

33.4%

38.4%

Percent of Participants—Contributing At, Above, Below Match Threshold

50%

40%

30%

20%

10%

0%60+50-5940-4930-3920-29

Percent of Participants Contributing Below Match Threshold—by Age

20.0%21.1%

31.4%

26.2%

40.8%

0% 10% 20% 30% 40% 50%

Percent of Participants Contributing Below Match Threshold—by Salary

$100k+ 10.0%

$80-$99k 15.9%

$60-$79k 22.0%

$40-$59k 30.4%

$20-$39k 38.6%

<$20k 41.7%




among existing participants (6%). In general, younger, lower tenured and male participants were more likely to invest in a Roth 401(k).

Interestingly, many of the Roth contributors also made before-tax or after-tax contributions. In fact, 54% of the Roth contributors contributed to before-tax accounts at the same time. Fourteen percent of the Roth contributors also made after-tax contributions, when available. The average total contribution rate (including before-tax, after-tax and Roth) of the Roth contributors was 10.8%

in 2009, which was significantly higher than the average total contribution rate of the universe, and also higher given contributions are after-tax.

Usage of Roth 401(k) varied significantly by company—ranging from usage of 4% to 22%. Some companies had very low usage primarily because the Roth 401(k) was only recently introduced. Organizations with more financially savvy populations were more likely to have a higher utilization rate. In addition, those organizations with a robust communication strategy also experienced greater success.

After-Tax Contributions

Participation in After-Tax Plan— 6.9% of ParticipantsAverage After-Tax Contribution Level— 5.2% of Pay

More than half of the plans in the study also permit participants to contribute to an after-tax 401(k) account. In 2009, only 6.9% of eligible participants opted to contribute on an after-tax basis. The average after-tax contribution rate was 5.2% of pay, which is unchanged from 2008. Participants who were by far the most likely to contribute on an after-tax basis were either lower-waged workers who are likely seeking to obtain the employer matching contribution and subsequently take a withdrawal, or higher-income workers who are seeking additional ways to defer taxes on retirement earnings. Nearly 8.3% of those earning between $20,000 and $40,000 made after-tax contributions in 2009. Another 8.4% of those earning over $100,000 also contributed to their after-tax account. The average balance accumulated was $20,620 at the end of 2009, an increase from $16,650 in 2008 due to the market rebound.

10%

8%

6%

4%

2%

0%$80-$99k $100k+$60-$79k$40-$59k$20-$39k<$20k

Percent of Participants Using Roth—by Salary

8.2%

9.9%

7.5%

4.9%

7.9%

6.2%

20%

15%

10%

5%

0%60+50-5940-4930-3920-29

Percent of Participants Using Roth—by Age

2.6%4.2%

6.0%

16.6%

9.4%


Total Contributions—Employee and Employer Contributions

Average Total Contribution—$7,330 (10.2% of Pay)

Employee contributions are only part of the savings picture. Total contributions into defined contribution plans, including employee and employer contributions, comprised 10.2% of pay, with 6.6% coming from employee contributions (cumulative, not end of year contribution rate as the previous analysis illustrated) and 3.5% coming from employer contributions during the year.

Older participants had the highest total contribution. Those in their 60s had a total 12.8% of pay contributed to the 401(k) plan (8.7% from

employee and 4.1% from employer), compared with 6.6% of total contribution for those in their 20s (4.1% from employee and 2.5% from employer). Obviously, some of the younger employees might be missing part of the company match.

0% 2% 4% 6% 8% 10% 12%

Average Employee and Employer Contributions—Percentage of Pay

TotalContributions

10.2%

YTD EmployeeContributions

6.6%

YTD EmployerContributions

3.5%


Plan Balances

Average Total Plan Balance—$70,970 Median Total Plan Balance—$23,160

For many participants, the market rally in 2009 as well as new contributions helped their 401(k) plan assets to recover significantly from their lows. However, across all participants, the average balance was still 11% lower than 2007 levels. The average 401(k) participant’s total plan balance was $70,970 at the end of 2009, up significantly from $57,150 in 2008, but still lower than the

2007 level at $79,570. On the other hand, the median plan balance ($23,160) in 2009 was slightly higher than that of 2007($22,070).

By the end of 2009, only participants aged 20 to 30 had an average balance larger than pre-recession levels. This group of participants had the largest increase (51%) in average balance in 2009, due to the relatively larger impact of new contributions.

Personal Rate of Return

Median Personal Rate of Return—24.3%

In 2009, the median rate of return earned by participants was 24.3% across the universe, with half of participants earning above and below this level. Although returns in 2009 were very strong, considering the historical declines in 2008 (with a -28.3% median return), most participants have not yet recovered their losses.

The majority of participants earned more than 20%, while thirty-seven percent of participants had returns between 0% to 20%.

$100k

$80k

$60k

$40k

$20k

$02008 20092007200620052003 2004

Average Plan Balance—Trend over Time

$79,570$82,310

$57,150

$70,970$68,630$75,700

$64,560

$0 $20k $40k $60k $80k $100k $120k $140k

Average and Median Balance—by Age

60+

50-59

40-49

30-39

20-29

$34,690$109,160

$55,690$122,200

$36,790$78,510

$17,360$36,230

$4,820$10,110

Median Balance Average Balance

30%

25%

20%

15%

10%

5%

0%40%+30-40%20-30%10-20%-10-0% 0-10%

Distribution of Returns—by Participants

23%

27%

11%

20%

17%

2%

Plan Balances and Participant Returns


Plan Balances and Participant Returns (continued)

Participants with the largest losses in 2008 experienced the highest returns during 2009. In fact, those who lost in excess 40% in 2008 had a strong median return of 36.3% in 2009. Participants who lost between 30 to 40% in 2008 also achieved a median return of 30.2% in 2009.

Participants with premixed portfolios had significantly stronger returns during 2009 than those without. Investors that pooled all assets into one premixed portfolio had the strongest returns, with a median rate of nearly 30%. By comparison, participants with no allocation to premixed portfolios gained 20.5%.

0% 10% 20% 30% 40%

ROR Earned During 2009

Returns Earned During 2008 Compared to 2009

36.3%

30.2%

23.7%

17.2%

9.6%

0%+

-10 to 0%

-20 to -10%

-30 to -20%

-40 to -30%

<-40%

4.2%


Rate of Return—By AgeParticipants in their 20s and 30s had the highest investment returns during 2009, with a median return of 29.1% and 27.6% respectively. Nearly two-thirds of these participants had returns in excess of 20%, due to their generally larger equity allocation. Although all age groups had strong returns in 2009, only those aged 20 to 30 had a return in 2009 that exceeded their loss in 2008.

Balance to Pay Ratios

Average Balance to Pay Ratio—0.9

The average 401(k) participant with 11 years of tenure saved only less than one times his or her salary. The table below shows the current balance to pay ratios of the middle aged and older participants were well below the target ratios (for full career DC only participants) at the end of 2009. Additionally, it is notable that men have significantly better ratios than women—on average men are at 1.0 versus women at 0.8.

Average Balance to Pay Ratio—by Age

Age Current Balance to Pay Ratio

Milestone Multiples of Pay

20-29 0.2 0.3

30-39 0.5 1.0

40-49 1.0 3.0

50-59 1.5 7.5

60+ 1.6 11.5

0% 10% 20% 30% 40%

Median Rate of Return—Participants with or without Premixed Portfolios

PremixedMixed withOther Funds

27.5%

All Assets inOne Premixed

29.8%

No PremixedAllocation

20.5%

0% 10% 20% 30% 40%-40% -30% -20% -10%

2008 2009

0%

Median Rates of Return—by Age

29.1%

27.6%

24.7%

21.2%

60+

50-59

40-49

30-39

20-29

18.1%

-28.5%

-30.4%

-29.5%

-26.7%

-22.6%


Asset AllocationAsset allocation was examined as of year-end 2009. The funds available to participants in their 401(k) plans are mapped into 13 fund classifications, and based on this, each participant’s asset allocation is determined. There are two ways that the average asset allocation is measured:

Equally weighted by participants—the asset ▪allocation percentage was calculated for each participant first. Then an average was taken across the entire universe. In this way, the participants with very large plan balances don’t skew the average.

Weighted by assets—the balances in each ▪asset class were summed up for the universe, then the allocation in each asset class was calculated as a percentage of total assets. This measures overall asset changes.

Asset Allocation—Equally Weighted

Top three exposures, equally weighted: 1) Premixed Portfolios at 24.7% of assets2) GIC/Stable Value at 17.1% of assets3) Large U.S. Equity at 15.3% of assets

The equally weighted asset allocation shows there was significant improvement in portfolio diversification across participants over the past few years. However, it also appears that little rebalancing is occurring during the market volatility, as exposure moves with market performance.

Premixed portfolios, including target-date and target-risk funds, continued growing in popularity among participants. The average portfolio had 24.7% of assets in this asset class by the end of

2009 (up nearly 2 percentage points from 2008, and 8 percentage points from 2007). Due primarily to market movement, the allocation to GIC/stable value was down by 3.3% to 17.1%. The allocation to large U.S. equity remained in the third place at 15.3%, nearly unchanged from the previous year. Interestingly, company stock allocations increased by 3.7 percentage points, which reversed the trend seen for many years, mainly due to high returns in some employer stock funds, not participant transfers.

0% 5% 10% 15% 20% 25% 30%

Asset Allocation—Equally Weighted Breakdown

MoneyMarket

GIC/StableValue

Bond

Balanced

Premixed

Large U.S.Equity

Mid U.S.Equity

Small U.S.Equity

International

EmergingMarket

SpecialtySector

CompanyStock

Self-DirectedWindow

1.7%2.2%

17.1%20.4%

6.1%6.4%

5.1%6.3%

24.7%23.0%

15.3%15.9%

2.8%2.7%

4.0%4.5%

6.5%6.2%

1.6%1.2%

0.4%0.5%

13.8%10.1%

0.9%0.6%

2009 2008

Investment Behavior


Asset Allocation—Asset Weighted

Top three exposures, asset weighted: 1) Large U.S. Equity at 20.6% of assets2) GIC/Stable Value at 19.5% of assets3) Company Stock at 13.1% of assets

The changes in asset weighted allocations were influenced by participants with larger assets. The largest change in 2009 appeared in GIC/stable value—the holdings were at 19.5% by the end of 2009, down 4.8 percentage points from 2008, which

moved it to second place in terms of popularity (from first place in 2008). Money market holdings were also down slightly by 1.1% from 2008.

On the other hand, the allocation to large U.S. equity was up slightly by 1.2 percentage points to 20.6%, which sent it back to the top holding in the universe at the end of 2009. Premixed portfolios and emerging markets also gained more than 1% in 2009. Company stock exposure increased nearly 2%.

Equity Exposure

Percentage of Total Plan Balance in Equities—66.9%Percentage of Employee Equity Contributions—63.8%

Equity allocation is a helpful measure to examine overall portfolio risk. In this analysis, balanced funds are assumed to be a mix of 60% in equity and 40% in fixed income asset classes. Premixed portfolios (including target-date and target-risk funds) use industry average equity and fixed income holdings for each respective portfolio type.

0% 5% 10% 15% 20% 25% 30%

Asset Allocation—Asset Weighted Breakdown

MoneyMarket

GIC/StableValue

Bond

Balanced

Premixed

Large U.S.Equity

Mid U.S.Equity

Small U.S.Equity

International

EmergingMarket

SpecialtySector

CompanyStock

Self-DirectedWindow

2.1%3.2%

19.5%24.3%

7.6%8.0%

5.1%6.2%

11.1%9.7%

20.6%19.4%

2.9%2.3%

5.3%5.1%

7.7%6.6%

2.2%1.3%

0.5%0.5%

13.1%11.2%

2.4%2.2%

2009 2008

75%

70%

65%

60%

55%

50%

45%

40% 2008 20092007200620052003 2004

Historical Average Equity Allocation

67.7%68.4%

59.0%

66.9%69.6%

67.7%67.9%


By the end of 2009, the average participant’s overall allocation to equities was at 66.9%, up from 59.0% in 2008, and very close to the equity holdings in 2007 (67.7%). As for new employee contributions being directed into equities, 63.8% of participant discretionary contributions were directed to stocks, up slightly from 63.0% in 2008, but still lower than 66.3% in 2007. Since new contributions were not affected by the market returns, it is a better measure of participant sentiment.

Younger participants had the highest increase in equity allocation in 2009 due to the strong stock market return. Workers in their 20s and 30s had 15% and 10% increase in equity allocation, respectively. On the other hand, the equity holdings of participants in their 60s only increased by 2.5 percentage points to 51.7% in 2009. Looking at future contributions directed to equities, some significant changes were seen among younger workers and older workers—younger workers increased contributions going into equities by 11 percentage points, while workers 60 and over decreased by 8 percentage points.

In 2009, 24.7% of participants had less than 50% of their total balance in equities, down 4.3 percentage points from 2008. Among people in their 20s, 8.9% held less than 20% of assets in equities. Fifteen percent of those earning $20,000 to $40,000 did so as well.

Asset Transfers

Total Assets Transferred: 1.9% of Total AssetsAsset Classes Receiving Flows: Premixed Portfolios, Bond and InternationalAsset Classes Losing Flows: GIC/Stable Value, Company Stock and Money Market

Investment Behavior (continued)

20% 30% 40% 50% 60% 70% 80%

Total Equity Exposure—by Age and Year

60+

50-59

40-49

30-39

20-29

51.7%49.2%

59.5%54.9%

68.3%61.3%

72.7%63.1%

75.0%60.0%

2009 2008

20% 30% 40% 50% 60% 70% 80%

Equity Contributions—by Age and Year

60+

50-59

40-49

30-39

20-29

47.5%54.7%

55.7%60.0%

65.4%65.7%

70.0%66.5%

72.4%61.6%

2009 2008

50%

40%

30%

20%

10%

0%100%75-99%50-74%20-49%0% 1-19%

Concentration of Participant Balances in Equities—by Year

7.1%9.0%

6.4%8.2%

11.2% 11.8%

23.2%

37.1%

44.4%

26.1%

7.8% 7.8%

2009 2008



Overall participant asset transfers in 2009 were fairly minimal, at 1.9% of total assets on average. Older workers and those with larger balances were more likely to make transfers, and also the magnitude of transfers were larger.

The net direction was equity oriented. Premixed portfolios and bond funds each received 25.2% and 25.6% of net transfers respectively, followed by international funds (19%).

Outflows mainly came from company stock (40%), GIC/stable value (37%), and money market funds (15%). Participants in their 20s had the highest transfer percentage into equities, while participants in their 50s had less than half as much. Those over 60 had net transfers into fixed income.

Company Stock

Average Allocation to Company Stock Across All Participants—13.8%Average Allocation to Company Stock Where Available—18.6%

Company stock allocations have declined substantially during the past few years until 2009. The average allocation to company stock across the entire universe was 13.8% by the end of 2009, which reversed the trend in the past few years, due to strong return in some employer stocks in 2009 instead of transfers. In plans that offer company stock as an investment option, the average allocation to company stock was 18.6% in 2009, up from 14.9% in 2008.

When company stock is available, more than two-thirds of participants either had no assets in company stock or limited their company stock allocations to 20%. Further, a smaller percentage

2.5%

2.0%

1.5%

1.0%

0.5%

0%$100k+$80-$99k$60-$79k$40-$59k<$20k $20-$39k

Total Transfers as a Percent of Balance—by Salary

2.4%

2.1%2.3%

1.2%

1.8%

1.0%

-40% -20% 0% 20% 40%

Participant Transfers—by Asset Class

MoneyMarket

GIC/StableValue

Bond

Balanced

Premixed

Large U.S.Equity

Mid U.S.Equity

Small U.S.Equity

International

EmergingMarket

SpecialtySector

CompanyStock

Self-DirectedWindow

-15.4%

-36.9%

25.6%

-1.6%

25.2%

-6.2%

5.5%

6.4%

19.0%

7.2%

1.5%

-40.0%

9.5%


(2.5%) of participants held all of their balances in company stock by the end of 2009.

Premixed Portfolios

51.2% Hold a Premixed Portfolio When Available42.0% Had All Balances in a Premixed Portfolio (Among those Holding)

Premixed portfolios are defined as diversified, target-date or target-risk portfolios. Target-risk portfolios include mixes geared towards a risk tolerance, whereas target-date are moving towards a future point in time. According to the 2009 Hewitt Trends & Experience in 401(k) Plans Survey, premixed portfolios were offered by 83% of the plans in 2009, up 6 percentage points from 2007, primarily driven by the surge in target-date fund adoption. In addition, an increasing number of plan sponsors are using target-date portfolios as their default investment option under automatic enrollment.

Due to the increase in the prevalence and participant usage of the premixed portfolios as investment options, as well as increasing participant defaults, these funds have become a larger part of participants’ assets. By the end of 2009, the average participant in the universe allocated nearly a quarter of assets to premixed portfolios, which represented the largest asset class. When available in the plan, 51.2% of participants invested in a premixed portfolio, up from 49.6% in 2008, and just 40.3% in 2005.

Among those who held a premixed portfolio, it also tended to be a substantial part of their

30%

25%

20%

15%

10%

5%

0%2008 20092007200620052003 2004

Company Stock Allocation—Trend over Time

15.9%

18.3%

10.1%

13.8%

26.5%

21.9%

26.1%

50%

40%

30%

20%

10%

0%100%75-99%50-74%20-49%0% 1-19%

Concentration of Balances in Company Stocks

37.3%40.4%

30.6%33.8%

19.4%16.3%

7.0%4.7%

3.2% 2.4%2.5%

2.3%

2009 2008 60%

50%

40%

30%

20%

10%

0%2009200820072005 2006

Percent of Participants Utilizing Premixed Portfolios

51.2%49.6%

44.6%47.5%

40.3%



allocation—the average percentage of balances dedicated to premixed portfolios was 55.5% in 2009. Notably, participants utilizing premixed portfolios also had lower allocations to company stock (on average 12.3% versus 13.8% for the universe).

Premixed Portfolios—By Age, Salary and TenureAmong those with access to premixed portfolios, younger participants and those with lower tenure were most likely to utilize them. Eighty-two percent of participants with less than one year of tenure invested in a premixed portfolio in 2009. Sixty-nine percent of participants in their 20s also invested in these funds, up 5% from 2008. This statistic is not surprising given that such funds are typically considered particularly attractive to inexperienced investors.

Additionally, women were much more likely to utilized premixed portfolios. In total, 55% of women have an allocation to premixed funds, versus 50% of men. Women also allocate a larger portion of their portfolios—on average 27.7% of total assets, versus 22.7% of assets for men.

The increased usage of premixed portfolios happened across all demographic groups, but the ones who experienced the largest changes were participants who enrolled through automatic enrollment, given defaults are generally target-date portfolios.

Equity Allocation of Participants with and without Premixed PortfoliosInterestingly, participants using premixed portfolios had relatively higher equity allocations. Further, equity concentration is more linear by age when viewed this way. Among users of premixed portfolios, the average equity allocation of workers in their 20s is 35 percentage points

60%

50%

40%

30%

20%

10%

0%2009200820072005 2006

Average Allocation to Premixed Portfolios

9%

40%

13%

44%

17%

47%

23%

56%

25%

56%

Allocation Across All Allocation Among Users

0% 20% 40% 60% 80%

Premixed Portfolio Usage—by Age

60+

50-59

40-49

30-39

20-29

39.0%39.2%

42.8%43.1%

47.9%46.8%

55.9%53.7%

68.5%63.5%

2009 2008

Premixed Portfolio Usage—by Tenure

20%

40%

60%

80%

100%

30+20–3010–206–105–64–53–42–31–20–1

81.7%75.8%

69.8%60.0%

54.4%51.0%

47.5%42.3%

35.2%31.7%


higher than those in their 60s. When comparing this to participants with no premixed portfolio allocation, the difference is 14 percentage points.

There was also a marked improvement for women using premixed portfolios. Women without premixed holdings held only 57.7% in equities (versus men at 62.7%). That disparity dissipated across gender when premixed portfolios are utilized.

Premixed Portfolios—Quality of UsageNow that premixed portfolios are used by half of participants, the quality of usage remains an important topic. More investors are using premixed portfolios as a turnkey solution, which is the intention of these types of investments.

In 2009, 42% of participants who held premixed portfolios invested all of their diversified 401(k) balances in the premixed portfolio they selected, an increase of 7 percentage points from 2008. This analysis includes participants with both a premixed portfolio and company stock, since some companies match in company stock. Excluding participants with both a premixed portfolio and company stock, nearly 30% of participants still invest all their assets in one premixed portfolio.

When analyzing target-date versus target-risk funds, target-date funds appear to be an easier choice for participants to use as a turnkey solution. Forty-four percent of target-date fund investors held all their assets in one target-date fund. On the other hand, 30% of target-risk fund investors did so.

Equity Allocation of Participants with and without Premixed Portfolios—by Age

Age No Premixed Mixing Premixed with Other Funds

All Assets in One Premixed

20-29 62.8% 79.2% 86.4%

30-39 66.8% 76.9% 83.5%

40-49 64.3% 73.0% 77.7%

50-59 56.1% 65.3% 64.8%

60+ 48.6% 59.8% 51.6%

0% 20% 40% 60% 80% 100%

Percent Equity Exposure—by Premixed Usage and Gender

NoPremixed

57.7%

SomePremixed

AllPremixed

62.7%

79.6%77.7%

72.6%72.7%

Women Men

Quality of Premixed Usage—by Tenure

20%

40%

60%

80%

100%

30+20–3010–206–105–64–53–42–31–20–1

78.7%71.9%

56.2%44.7%

38.0%34.2%

31.4%25.2% 19.7%

15.8%

0% 10% 20% 30% 40% 50%

Quality of Premixed Usage—by Gender

Men 37.5%

Women 46.8%



A significantly higher number of low tenure participants used premixed portfolios as a turnkey solution. Among all those with less than one year of tenure invested in a premixed portfolio, 78.7% had all of their balances in a single premixed portfolio in 2009. On average, this group held 86.3% of their assets in the premixed portfolios. In contrast, only 15.8% of participants with 30 or more years of tenure invested all of their diversified 401(k) monies in a premixed portfolio.

Finally, women are more likely to invest all of their assets into a single premixed portfolio. Among all users of premixed funds, 46.8% of women were fully invested in a single portfolio versus only 37.5% of men.

Self Directed Brokerage Account

Percentage of Participants with SDBA—5.2%Average SDBA Balance—$91,590Percentage of Balances in SDBAs Among Participants Who Invested in a SDBA—50.8%

Self Directed Brokerage Accounts (SDBAs) are designed to appeal to the financially savvy 401(k)

investors, who desire more choice among their 401(k) investments. When available, on average, 5.2% of participants invested within an SDBA during 2009. Among these workers, the average balance in the SDBA was $91,590 at year-end. Over all of their assets, the average participant who utilized an SDBA invested just over half, 50.8%, within the SDBA.

Participants with higher salaries and higher balances were more likely to use the SDBA. Among workers earning more than $100,000, 10.4% use the SDBA. Assessing the usage by balance, 14.0% of workers with a balance in excess of $100,000 utilized it. The average participant who invested in an SDBA had a total plan balance (across the SDBA and core) of about $180,000 in 2009, which is more than two times as large as the average balance across the universe. Men are more than twice as likely to utilize an SDBA, with nearly 6.8% of male participants invested in an SDBA versus only 2.7% of female workers.

Number of Asset Classes Held

Universe Average—4.4 Asset Classes Held

Another way to examine portfolio diversification is to gauge the number of asset classes being used by participants. In this analysis, a premixed portfolio is assumed to represent five asset classes, and a balanced fund is assumed to represent two asset classes.

12%

10%

8%

6%

4%

2%

0%$100k+$80-99k$60-79k$20-39k $40-59k

Percent of Participants Using SDBA—by Salary

10.4%

7.0%

6.0%6.7%

1.5%

0% 2% 4% 6% 8%

Percent of Participants using SDBA—by Gender

Men 6.8%

Women 2.7%


In 2009, the average defined contribution plan in the Hewitt Universe offered 19 funds (including premixed portfolios) diversified across eight asset classes. However, on average, participants only held 4.4 asset classes and 4.2 funds in 2009. There was a small increase in the number of asset classes

held by participants in recent years, primarily due to the higher usage of premixed portfolios. For the same reason, we saw the percent of participants holding five or more asset classes increase by 3.2% from 2008, to 61% of participants.

Although marginally lower, still 21.7% of participants held only one or two asset classes in 2009. The top two choices for participants holding one asset class were stable value and large U.S. equity. In fact, more than half (51.8%) of those holding one asset class invested their entire balance in a stable value fund.

Participants with higher salaries and higher balances were the groups that consistently held a larger number of asset classes. Additionally, men have generally utilized more asset classes than women, on average. However, due to the increased use of premixed portfolios, younger, lower-tenured workers, and women had a higher usage of asset classes in 2009.

35%

30%

25%

20%

15%

10%

5%

0%Six+FiveThree-FourOne Two

Distribution of Asset Classes Utilized

32.5%

28.5%

11.6%

17.2%

10.1%


Transfer Activity

Percentage of Participants Who Traded—16.2% Percentage of Participants Who Made Future Investment Election Changes—19.7% Average Number of Transfers per Participant Who Traded—3.4

Despite the large market volatility in 2009, only 16.2% of participants made any sort of fund transfer during the year. This was down substantially from 19.6% in 2008.

When transfer activity is reviewed to assess rebalancing, participants holding one premixed portfolio are not required to rebalance given it is automatically done for them. Eliminating this group from the analysis, 15.9% of participants traded in 2009, confirming very few participants rebalanced their portfolio during the year (or in the past). Automatic rebalancing was available in 19% of the plans across the universe in 2009. However, only 10.7% of participants elected to utilize the feature, where available.

Men were more apt to trade than women (20.2% of male participants versus only 11.4% of female participants). Also, longer tenured participants and those with higher salaries and balances are more likely to trade. Thirty percent of participants with $100,000 or more in assets made a trade in 2009, and they traded on average 4.1 times. In addition, 29.3% of this group of participants made future investment election changes. In contrast, only 6.6% of those with less than $10,000 in assets traded, and 11.3% changed future contributions.

Contribution Rate Changes

Percentage of Participants Who Made Contribution Rate Changes—26.9%

Participants may adjust their contribution rates as their retirement needs and goals change, or when their financial circumstances change. Their contribution rate will also increase automatically each year, if they opt to utilize contribution escalation. Nearly 13% of participant elected contribution escalation when available. Additional details are provided under the Contribution Rate section.

Transfer Activity—by Salary

Salary Percent of Participants

Average Number of Transfers

<$20,000 4.6% 3.2

$20,000–$39,999 10.5% 3.3

$40,000–$59,999 16.5% 3.3

$60,000–$79,999 20.6% 3.4

$80,000–$99,999 24.0% 3.6

$100,000+ 27.7% 3.5

Transfer Activity—by Balance

Salary Percent of Participants

Average Number of Transfers

< $10,000 6.6% 2.5

$10,000–$19,999 12.6% 2.9

$20,000–$29,999 15.1% 3.0

$30,000–$39,999 16.6% 3.0

$40,000–$49,999 18.1% 3.3

$50,000–$59,999 19.1% 3.4

$60,000–$69,999 20.4% 3.2

$70,000–$79,999 21.3% 3.3

$80,000–$89,999 22.3% 3.3

$90,000–$99,999 23.2% 3.4

$100,000+ 30.2% 4.1

Account Activity


Loans

Participants with Loans Outstanding—25.6% Participants Initiating New Loans—13.1%

Nearly all of the plans in the Hewitt Universe offer a type of loan provision. In 2009, 25.6% of active participants had a loan outstanding, which was up slightly from 2008 (23.1%). During the year, 13.1% of participants initiated new loans, which was also up from 2008 (10.6%).

Although the majority of participants (70.8%) had only one loan outstanding, 26.9% had two loans at the same time. The average loan amount outstanding was $7,770 by the end of 2009, which represented 21.1% of these participants’ total assets. Middle-aged and middle-income participants were most likely to have outstanding loans. Women initiated more loans during the year, with 13.7% of women taking a loan versus 12.9% of men.

Participants who took loans, on average, had lower contribution rates than participants who did not. The average contribution rate of those with loans was 6.3% in 2009, compared to an average contribution rate of 7.9% for participants who did not have loans

outstanding. In addition, 16.6% of participants stopped contributing after taking a loan, versus only 8.9% of participants who stopped their contributions across the rest of the population in the universe.

Withdrawals

Participants Taking Withdrawals—7.1%

During 2009, 7.1% of participants took a withdrawal, which was slightly higher than that of 2008 (5.9%). It was also the highest percentage in the history of the benchmark reports. Notably 20% of all withdrawals were hardships. Both hardship and non-hardship withdrawals were up in 2009.

Withdrawals—by Salary

Salary Percent of Participants—Any Type of Withdrawal

Percent of Participants— Hardship Withdrawal

Percent of Participants— Non-Hardship Withdrawal

< $20,000 7.0% 9.3% 90.7%

$20,000–$39,999 9.7% 22.9% 77.1%

$40,000–$59,999 9.7% 20.1% 79.9%

$60,000–$79,999 6.6% 14.9% 85.1%

$80,000–$99,999 4.8% 12.9% 87.1%

$100,000+ 3.6% 10.1% 89.9%

35%

30%

25%

20%

15%

10%

5%

0%60+50-5940-4920-29 30-39

Participants with Loans—by Age

16.5%

27.0%28.2%30.6%

15.5%

0% 2% 4% 6% 8% 10%

Percent of Participants Taking Withdrawals—Overall and by Gender

Women 8.2%

Overall 7.1%

Men 6.6%


Participants with lower salaries were more apt to take withdrawals: 9.7% of participants with a salary between $20,000 and $40,000 took a withdrawal in 2009, but only 3.6% of those earning $100,000 did so. Participants aged 59½ or older (who are generally able to take non hardship withdrawals from their before-tax account) were nearly twice as likely on average to take a withdrawal in 2009. Women also were more apt to take withdrawals, with 8.2% of women accessing monies versus 6.6% of men.

Transactions Channels Used

Percentage of Participants Making a Transaction—52.3%Percentage of Transactions Via the Internet Site—92.4%

Slightly more than half of all participants made some sort of transaction in their 401(k) plan during 2009. This included a contribution rate change, early loan repayment, investment election change, new enrollment, new loan, payment, transfer, or combination of events. The vast majority of these transactions were performed via the Internet.

Account Activity (continued)


In 2009, 92.4% of all transactions were performed via the Internet, slightly lower than 2008 (93.7%). At the same time, Interactive Voice Response (IVR) system utilization was still at a nominal level—only 0.4% of all transactions were performed through the IVR system. The use of the Benefits Center for transactions (7.3%) was slightly higher in 2009 than 2008 (5.7%).

Younger workers were more likely to use the Internet for transactions than older workers, where 95.1% of participants aged 20 to 29 performed transactions via the Internet, versus 87.1% of participants aged 60 or older. At the same time, workers 60 and above used the Benefits Center nearly three times (12.3%) as much as participants in their 20s. These figures likely reflect the more complex transactions that are required for older workers as they reach retirement, as well as the comfort of younger workers with Internet technology.

Additionally, while women were less likely to make any sort of transaction (only 48.9% of women versus 55.6% of men), women were slightly more likely to utilize the Benefit Center. Over all transactions, 8.8% of women used the Benefit Center compared to 6.2% of men.

Web utilization was also closely tied to accessibility. Participants in lower-wage industries with limited Internet access, such as health care/medical services, were less likely to transact via the Internet than were participants in higher-wage industries where desk jobs—and Internet access—abound. Only 86.6% of those in the health care industry made a transaction via the Internet. However, over 95% of participants in the computer software/professional service industry, telecommunication industry, and pharmaceuticals/personal products industry used the Internet to make their transactions.

Percent Transactions Conducted—by Channel

Internet 92.4%

Benefits Center 7.3%

Interactive Voice Response 0.4%

0% 3% 6% 9% 15%12%

Percent Transactions Via Benefits Center—by Age

60+

50-59

40-49

30-39

20-29

12.3%

7.5%

7.5%

6.3%

4.8%


Participating Demographics

General DemographicsAverage Age . . . . . . . . . . . . . . . . . . . . . . . . .43.6Average Salary . . . . . . . . . . . . . . . . . . . $63,220Median Salary . . . . . . . . . . . . . . . . . . . . $48,960Average Tenure . . . . . . . . . . . . . . . . . 10.9 years

Participating—by Age

20-29 15.8%

30-39 23.5%

40-49 28.0%

50-59 24.6%

60+ 8.1%

Participating—by Tenure

0-1 4.6%

1-2 8.4%

2-3 8.8%

3-4 8.0%

4-5 6.8%

5-6 5.3%

6-10 16.4%

10-20 23.2%

20-30 12.7%

30+ 5.8%

Participating—by Salary

<$20k 10.6%

$20-39k 28.1%

$40-59k 20.8%

$60-79k 14.2%

$80-99k 10.2%

$100k+ 16.2%

Participating—by Gender

Female 44.2%

Male 55.8%

Demographics


Participating—by Industry

Industry Percent of Participants


Chemicals 0.5%

Computer Services/Software/Professional Services 1.9%


Consumer/Misc Product Manufacturing 3.6%






Insurance 10.8%

Retail (including wholesale & distribution) 25.2%



Participating—by Plan Size

Plan Size Percent of Participants

< 5,000 2.3%

5,000–10,000 5.7%

10,000–20,000 12.7%

20,000–40,000 27.9%

40,000+ 51.4%


Demographics (continued)

NonParticipating Demographics

General DemographicsAverage Age . . . . . . . . . . . . . . . . . . . . . . 38.9Average Salary . . . . . . . . . . . . . . . . . $31,870Median Salary . . . . . . . . . . . . . . . . . . $21,424Average Tenure . . . . . . . . . . . . . . . . 5.9 years

NonParticipating—by Age

20-29 32.6%

30-39 22.3%

40-49 21.0%

50-59 16.5%

60+ 7.7%

NonParticipating—by Tenure

0-1 18.9%

1-2 17.0%

2-3 13.0%

3-4 9.4%

4-5 6.6%

5-6 4.7%

6-10 12.1%

10-20 11.9%

20-30 4.3%

30+ 2.0%

NonParticipating—by Salary

<$20k 46.2%

$20-39k 33.7%

$40-59k 10.5%

$60-79k 3.9%

$80-99k 2.1%

$100k+ 3.6%

NonParticipating—by Gender

Female 48.4%

Male 51.6%


NonParticipating—by Industry

Industry Percent of Participants


Chemicals 0.3%

Computer Services/Software/Professional Services 0.6%


Consumer/Misc Product Manufacturing 2.3%






Insurance 3.9%

Retail (including wholesale & distribution) 52.8%



NonParticipating—by Plan Size

Plan Size Percent of Participants

< 5,000 2.0%

5,000–10,000 4.3%

10,000–20,000 7.2%

20,000–40,000 20.2%

40,000+ 66.3%


After-Tax Balance: Considers the after tax balance for employees who have an active participation status, and who have an after tax balance greater than zero.

After-Tax Contribution Level: Considers the after-tax contribution rate for employees who have an active participation status, who have an after-tax contribution rate greater than zero, and who have a balance greater than zero.

Asset Allocation: Available investment options are mapped to their appropriate asset class based on 13 possible fund classifications: money market, GIC/stable value, bond, balanced, premixed, large U.S. equity, mid U.S. equity, small U.S. equity, international equity, emerging markets equity, specialty sector, company stock, and self directed brokerage window.

Balance: Total plan balance reflects before-tax contributions, after-tax contributions, Roth contributions, employer contributions, rollover balances, any associated investment earnings, and loans.

Balanced Fund: Balanced funds are assumed to be 60% equities and 40% fixed income investments for purposes of this analysis.

Before-Tax Contribution Level: Considers the before-tax contribution rate for employees who have an active participation status, who have a before-tax contribution rate greater than zero, and who have a balance greater than zero.

Eligible: This includes all employees who have an active or eligible current participation status.

Equally Weighted: Signifies that assets are weighted equally across participants, regardless of size of assets.

Equity and Fixed Income: Available investment options are mapped to their appropriate asset class based on 13 possible fund classifications: Money market, GIC/stable value, and bond are fixed income asset classes. Large U.S. equity, mid U.S. equity, small U.S. equity, international equity, emerging markets equity, specialty sector, and company stock are equity asset classes. Balanced are assumed to be a mix of 60% in equity and 40% in fixed income asset classes. Premixed portfolios (including target-date and target-risk funds) use industry average equity and fixed income holdings. Self-directed brokerage is assumed to be a mix of 50% in equity and 50% in fixed income asset classes.

Funds Held: Count of number of funds held with a fund value greater than zero. All forms of company stock are counted only as one fund per participant.

Hardship/Nonhardship Withdrawal: Amount distributed during the year as a hardship or nonhardship withdrawal.

Inactive Participants: This includes all employees who have a terminated current employment status, and who have a balance greater than zero. Retired employees are also included in this analysis.

Industry: Industry is generally self defined by plan sponsors. Plans that did not fit into established industries are classified as “Other” and not reflected in the industry tables. Not every industry is available for every benchmark.

Loans Outstanding: Outstanding loan principal is greater than zero.

Definitions and Terminology


Match Threshold: This only includes companies with a uniform match schedule across the plan. The highest company match level is considered the match threshold for companies with a graded match schedule.

Nonparticipating: This includes all employees who have active or eligible current participation status, and whose year to date before, after tax or Roth contribution amount is equal to zero.

Participating: This includes all employees who have active or eligible current participation status, and whose year to date before or after tax or Roth contribution amount is greater than zero.

Plan Size: Plan size is measured by the number of eligible employees in the defined contribution plan.

Premixed Portfolios: A series of balanced funds within a plan that assume varying levels of risk. Premixed portfolios are assumed to consist of five asset classes for purposes of this analysis. Premixed portfolios may include target-risk or target-date portfolios.

Salary: Annualized base pay is used for salary data. Salary must be on record in order for an employee to be included in this demographic group.

Self-Directed Brokerage Account: A self-directed brokerage account is an investment option that allows participants to maintain some or all defined contribution plan assets in a separate, individual brokerage account for the purpose of holding individual stocks, bonds, or mutual funds that are not offered as part of the plan’s main investment options. It is also referred to as a “brokerage window.” In this study, we analyze both mutual fund windows and full brokerage windows, which include stocks, bonds, and mutual funds.

Tenure: Years of service with the company, based on original hire date. Tenure must be on record for an employee to be included in this demographic group.

Transfers: Year-to-date transfer to/from any fund held is not equal to zero. Liquidation of funds is separate from true transfer activity.

Definitions and Terminology (continued)

About Hewitt Associates Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.

For more information about this study, please contact:

Pamela Hess Hewitt Associates LLC 100 Half Day Road Lincolnshire, IL 60069 (847) 295-5000 [email protected]

Yan Xu Hewitt Associates LLC 100 Half Day Road Lincolnshire, IL 60069 (847) 295-5000 [email protected]

hewitt benchmarks

Documents

investment behavior

plan balances

plan structureby

employees eligible

eligible employees

participant savings

certain plan features

percent of plans