401(k) Plans:

Participation and Deferral Rates by Plan Features and Other Information

PEMD-88-20FS: Published: Apr 29, 1988. Publicly Released: Apr 29, 1988.

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Pursuant to a congressional request, GAO provided information regarding so-called 401(k) retirement programs, focusing on the: (1) number of workers at firms which offered only a 401(k) plan; (2) kinds of plans firms converted or replaced when they set up 401(k) plans; and (3) differences in average employee participation rates and deferral percentage rates among plans with different provisions.

GAO found that: (1) about 4 percent of 3,500 firms responding to a survey offered 401(k) plans to their 9.9 million employees; (2) 31 percent of the sponsoring firms offered no other retirement plan to their 800,000 employees; and (3) virtually no firms with at least 500 employees offered only a 401(k) plan. GAO also found that: (1) 61 percent of 401(k) plans were new plans and not replacements or conversions of existing retirement plans; (2) firms with at least 100 employees tended to replace existing plans with 401(k) plans; (3) firms most commonly replaced profit-sharing plans with 401(k) plans; and (4) firms with at least 5,000 employees tended to replace thrift and savings plans with 401(k) plans. In addition, GAO found that employee participation and deferral rates: (1) were higher for plans offering employer matching contributions, unlimited opportunities to change the salary deduction amount, hardship withdrawal of employer contributions, and employee direction as to asset investment; (2) were lower for plans that allowed employees to borrow from plan assets and withdraw plan assets for hardship reasons; and (3) generally did not differ according to whether a plan allowed unlimited employee contributions.

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