New Charles Schwab Data Reveals 401(k) Plan Trends

Employers Display Steady Commitment to Providing 401(k) Features that Engage Employees and Drive Positive Behaviors

Wednesday, March 31, 2010 6:00 am PDT



Public Company Information:

"Highest in Investor Satisfaction with Self-Directed Services"

SAN FRANCISCO--(BUSINESS WIRE)--According to new data* from Charles Schwab, a 401(k) provider to approximately 1.5 million company retirement plan participants, employers remain focused on engaging their employees in retirement savings and providing 401(k) plan features that help drive positive savings behaviors. Through the end of 2009, 70 percent of plans serviced by Schwab made 401(k) investing advice available to participants, up from 62 percent in 2008, and 68 percent of plans offered target funds compared to 65 percent in 2008. In addition, 35 percent of employers were automatically enrolling employees in their plan, up from 33 percent in 2008.

Employee participation and savings rates both held steady from 2008 to 2009 according to initial Schwab data. 2009 plan participation rates remained at an average of 74 percent, and 2009 participant savings levels held at an average of approximately seven percent.

“People are emerging from the market downturn with a newfound respect for the importance of saving and retirement readiness,” said Dean Kohmann, vice president of 401(k) plan services for Charles Schwab. “Despite the fact that employers have understandably become more cautious about adopting 401(k) features that can increase plan costs, our plan sponsor clients remain focused on providing employees with the resources and tools they need to make informed decisions and meet their retirement savings goals.”

Additional highlights from Schwab 2009 plan data covering more than 1000 plans and 1.3 million participants include:

  • A majority of plans (70%) used aged-based target date funds as the default 401(k) investment for automatically enrolled participants, a slight increase from 69 percent in 2008. Additional default investment choices included balanced funds (21%) and money market and Stable Value funds (6%).
  • Of the 35 percent of employers automatically enrolling employees, nearly seven out of 10 employers (67%) were automatically enrolling newly hired employees in the company’s 401(k). The majority of employers (60 percent) enrolled their participants at a default rate of three percent, and large plans (2,500 or more participants) were far more likely to implement automatic enrollment, with 53 percent using an automatic enrollment program compared to a 28 percent among small plans (less than 500 participants).
  • Of the plans automatically enrolling employees, 34 percent were also automatically increasing savings rates for participants in 2009, reporting an average deferral ceiling of approximately seven percent. At the end of 2008, 30 percent of plans automatically enrolling employees also had an automatic savings increase feature.
  • More than half (54%) of plans offered a self-directed brokerage account (SDBA) for participants compared to 52 percent in 2008.
  • Fifty percent of plans offered a Roth 401(k) option for plan participants, an increase from 46 percent at the end of 2008.

“Of all the features provided in a 401(k) plan, access to advice can be one of the most powerful resources for helping people meet their savings goals,” noted Kohmann. “For example, among the retirement plans we serve at Schwab, approximately 70 percent of participants that receive and implement 401(k) advice make a change to their deferral rates, and we see those savings rates nearly double on average as a result, jumping from five percent to 10 percent of pay.”

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 7.8 million client brokerage accounts, 1.5 million corporate retirement plan participants, 753,000 banking accounts, and $1.4 trillion in client assets as of Feb. 28, 2010. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Named "Highest in Investor Satisfaction with Self-Directed Services" by J.D. Power and Associates in 2009, its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender) provides banking and mortgage services and products. More information is available at (0310-2115)

*2008 data is based on December 31, 2008, data for 1,026 overall Schwab plans averaging 1,176 participants. 2009 data is based on December 31, 2009, data for 1,062 overall Schwab plans averaging 1,167 participants. Estimated 2009 participation and savings rate results are based on a sample of 200 401k plans.


Charles Schwab
Michael Cianfrocca, 415-667-0344
Intermarket Communications
Eric Hazard, 212-754-5610

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