SAN DIEGO, Calif. (26 February, 2018) – BrightScope, a Strategic Insight company, is pleased to announce the Top 30 401k Plans of 2016 report. BrightScope’s Top 30 list is comprised of large 401k plans with high overall quality, as measured by the BrightScope Rating.
The BrightScope rating algorithm analyzes 200+ unique data points per plan and calculates a numerical score for every 401k plan in the country. The algorithm runs thousands of simulations for each plan to determine how quickly the average 401k participant will get to retirement via their employer’s plan. More details about the BrightScope Rating can be obtained in the FAQ section of the BrightScope website.
“This is our ninth year tracking America’s best 401k plans,” said Brooks Herman, Vice President, Data & Research, at BrightScope. “Over the years, the average 401k rating keeps improving, showing that America’s employers and employees are committed to improving their 401k outcomes.”
Which traits define the plans that make the Top 30 Plans List?
1. Generous Company Contributions
Company contributions are a major component of the BrightScope Rating and thus the Top 30 Plans List. Offering a match or profit sharing contribution to the plan is a great incentive for employees to participate and defer their salary towards retirement. Delta Pilots Savings Plan and American Airlines, Inc. 401(k) Plan for Pilots were some of the most generous plans on the Top 30 List. The average company generosity was over $15,000 per participant and can be in the form of a company match or profit-sharing.
2. Immediate Plan Eligibility
A plan’s eligibility period is the length of time between when an employee is hired and when they are eligible to participate in the plan. Short plan eligibility requirements allow new hires to save more towards retirement. This year’s Top 30 list includes twenty-six plans with immediate eligibility. Removing barriers to saving is important to the top plans.
3. Immediate Vesting
While a participant’s elective deferrals are always immediately vested, company contributions can take up to six years to vest depending upon the plan. Twenty-nine of the Top 30 plans offer immediate vesting of company contributions thus ensuring that the money in their account is theirs to keep.
4. Low Fees
Plan costs can greatly affect investment returns therefore altering participant account balances. BrightScope’s Total Plan Cost (TPC) calculations include investment expense ratios and administrative costs. Among plans found in this year’s Top 30 list, the average Total Plan Cost dropped to 0.22%.
5. High Participation Rates
The first step in saving for retirement is participating in an employer’s retirement plan. We have seen participation rates climb to over 97% in this year’s list.
6. Salary Deferral
Plans within the Top 30 list average over $14,100 in salary deferrals per participant. Companies can incentivize their employees to save in a number of ways.
Statistics of the 2016 Top 30 List:
- Target Date Funds keep climbing: they represent over 13% of assets in the Top 30 List
- Index Funds push up: they represent almost 43% of assets in the list, a 2% rise since last year
The complete list of Top 30 401k Plans with more than $1 billion in assets:
BrightScope obtains an increasing amount of its data directly from plan sponsors and record keepers, and augments these primary sources with data from publicly available sources such as the Department of Labor and the Securities and Exchange Commission. By analyzing and interpreting this data, BrightScope provides unprecedented transparency into the 401k industry.
The BrightScope Rating was developed by BrightScope, Inc. with the help of leading academics and independent 401k fiduciaries. By analyzing more than 200 individual data points, the BrightScope Rating algorithm calculates a single numerical value for each 401k plan. The data points examined cover broad categories such as total plan cost, company generosity and investment menu quality.
BrightScope has rated nearly 50,000 401k and 403b plans, spanning more than 57 million workers and over $4 trillion in assets. Industry adoption of the BrightScope Rating will lead to more cost-effective plans, increased participation rates, higher employee satisfaction and better outcomes for the 60 million employees who depend on their 401k plan for retirement.
To download a PDF version of this report, please click here.