An annual 401(k) plan benchmarking report finds that the top five industries with the best 401(k) plans continue to outpace the competition in nearly all metrics.
The results of Judy Diamond Associates’ fifth annual 401(k) Plan Benchmark Report show that the top five industries with the best 401(k) plans in 2019 were Financial Advice/Investment Activities, Certified Public Accounts, Lawyers and Legal Services, Insurance Providers/Brokers and Physicians. Following closely behind in the rankings were Engineers and Dentists before a sharp drop-off in the overall scores.
For this report, the firm examined nearly 600,000 401(k) plans covering more than 88 million eligible workers and $6 trillion dollars in total retirement assets, among 27 different industry groupings. Data comes from Form 5500 filings for the 2019 plan year, which the report notes represent the most recent data available at the time of the writing.
The rankings are based on seven different metrics of plan performance, including:
- average account balance; participation rate;
- rate of return;
- employee contributions;
- employer contributions;
- plan score; and
- employee longevity.
Each industry group was assigned its rank of 1-27 in each category based on the median overall industry value for each metric.
Overall, plans gained about $1 trillion dollars in value in 2019, representing a 20% jump in plan assets over the previous year. The report observes that the median rate of return on investments is very tightly clustered among all industries, with all 27 sectors reporting between a 20% and 22% rate of return.
Actual participation rates continue to remain at around 81% following several years of increases led by widespread adoption of automatic enrollment options, the report notes.
In addition, average account balances grew to $109,823, with average total contributions from both employees and employers increasing by about 8% year over year. Median contributions showed a slight decline, however, which the firm interprets to mean that more people are participating, though their savings rate remains about the same.
The Top Industry
The 13,728 firms that make up the Financial Advice and Investment Activities sector turned in the best overall performance, coming in at No. 1 overall out of the 27 industrial sectors the firm surveyed. In five of the seven metrics, this sector was the best or tied for best, with only the employee longevity metric trailing behind, at 8.3 years, for 15th place. This group is also notable for its high employee contribution and employer contribution rate. “Financial Advisors continue to do well in this kind of performance-based analysis, having placed in the top three industry sectors in each of our last five studies,” the report observes.
In contrast, the 10,829 companies in the Accommodation and Food Services sector ranked 27th out of the 27 industrial groupings Judy Diamond surveyed. Among the seven-performance metrics, this sector came in 26th for three of them and 27th for the other four, making it the lowest performing industry by a substantial margin, the report notes.
As one might presume, this sector is home to part-time and transient employees, who generally do not participate in the company’s 401(k) plan. To put this into perspective, the median participation rate for this industry is only about 54%, while the next lowest median participation rate is 79% for Transportation and Warehouse Workers.
“For advisors, this report represents an opportunity to have a meaningful discussion with your clients about how their plans are doing,” notes the study’s author, Eric Ryles, Vice President of Customer Solutions at Judy Diamond Associates. “For sponsors, these benchmarks provide an unbiased look into your industry and will help you determine if your plan is competitive within your peer group.”
