Reference Point May 2015

Transcription

1 T. Rowe Price Defined Contribution Plan Data As of December 31, Insights It s evident participants are taking advantage of the loan feature in 401(k) plans. Currently, one-fourth of participants who can take a loan have at least one. However, this behavior can have a negative impact on the participant s ability to save for retirement. Offering easy access to loans could cause participants to treat their 401(k) like a bank account. Even though participants must repay the loan, the repayment is made with after-tax dollars, which can affect their ability to continue to save. Sponsors should consider why they offer loans and their impact on participant savings. Ultimately, it s the plan sponsor s decision whether to offer loans. Plan sponsors may want to consider offering a maximum of one outstanding loan at any given time. This approach could help encourage participants to save more for retirement and simplify loan administration, including loan payroll setup. 53 % Percentage of plans that offer a maximum of one outstanding loan at a time. POTENTIAL STRATEGIES Consider offering a maximum of one outstanding loan Promote tools that educate participants on implications of taking a loan Want to learn more? Contact your T. Rowe Price representative. Visit troweprice.com/referencepoint 1

2 No. 1 PERCENTAGE OF PARTICIPANTS WITH AN OUTSTANDING LOAN BALANCE BY INDUSTRY Accommodation and Food Services Administrative and Support and Waste Management and Remediation Services Agriculture, Forestry, Fishing, and Hunting Arts, Entertainment, and Recreation Construction Educational Services Finance and Insurance Health Care and Social Assistance Information Management of Companies and Enterprises Manufacturing Mining Other Services (Except Public Administration) Professional, Scientific, and Technical Services Public Administration Real Estate and Rental and Leasing Retail Trade Transportation and Warehousing Utilities Wholesale Trade % % At 12%, the public administration industry has the fewest incidences of loans. Visit troweprice.com/referencepoint 2

3 No. 2 AVERAGE PARTICIPANT LOAN BALANCE BY INDUSTRY Accommodation and Food Services Administrative and Support and Waste Management and Remediation Services Agriculture, Forestry, Fishing, and Hunting Arts, Entertainment, and Recreation Construction Educational Services Finance and Insurance Health Care and Social Assistance Information Management of Companies and Enterprises Manufacturing Mining Other Services (Except Public Administration) Professional, Scientific, and Technical Services Public Administration Real Estate and Rental and Leasing Retail Trade Transportation and Warehousing Utilities Wholesale Trade $ 6,115 6,179 6,508 4,332 4,479 6,168 7,918 8,120 9,025 7,437 7,352 6,909 8,672 8,547 8,946 7,970 8,433 9,059 8,243 8,433 8,714 7,916 7,997 7,767 6,941 7,452 10,440 8,287 9,096 9,622 8,776 9,249 9,587 9,096 9,193 9,696 8,415 8,522 8,340 10,124 10,918 11,189 11,695 10,632 10,332 8,270 8,626 9,013 6,655 6,970 7,182 8,195 8,747 9,161 11,998 12,477 12,733 7,453 8,101 8,313 8,098 8,438 8, ,000 6,000 9,000 12,000 $15,000 The industry with the highest average loan balance is utilities, at $12.7K, compared with the industry average of $8.8K. Visit troweprice.com/referencepoint 3

4 No. 3 PERCENTAGE OF PLANS WITH AN OUTSTANDING LOAN BALANCE BY INDUSTRY Accommodation and Food Services Administrative and Support and Waste Management and Remediation Services Agriculture, Forestry, Fishing, and Hunting Arts, Entertainment, and Recreation Construction Educational Services Finance and Insurance Health Care and Social Assistance Information Management of Companies and Enterprises Manufacturing Mining Other Services (Except Public Administration) Professional, Scientific, and Technical Services Public Administration Real Estate and Rental and Leasing Retail Trade Transportation and Warehousing Utilities Wholesale Trade % % Visit troweprice.com/referencepoint 4

5 No. 4 AVERAGE PARTICIPANT LOAN BALANCES BY AGE <20 years $ 1,414 2,555 3, years 3,411 3,713 3, years 6,681 7,096 7, years 9,086 9,419 9, years 9,961 10,264 10, years 8,614 8,692 8, years 8,018 8,344 8, years 6,335 7,120 7,320 8,098 8,438 8, ,000 4,000 6,000 8,000 10,000 $12, year olds have the highest average participant loan balance at $10.5K. Visit troweprice.com/referencepoint 5

6 No. 5 PERCENTAGE OF PARTICIPANTS WITH OUTSTANDING LOANS BY AGE <20 years % years years years years years years years % The age group continued to have the highest percentage of participants with an outstanding loan balance. Visit troweprice.com/referencepoint 6

7 No. 6 MAXIMUM NUMBER OF OUTSTANDING LOANS ALLOWED 4.5% 1.8% 1.8% More than half of all plans only allow one outstanding loan to be taken at a time, while only about 8% of plans allow three or more to be taken at a time. 53.3% 38.6% 1 Any Type* 2 Any Type* 3 Any Type* More Than 3 Any Type* No Limit Any Type* * Any type plan may offer primary residence, standard, or both loan types. Fifty-seven plans did not offer loans as of December 31,. Methodology Nos. 1 6 Loan availability and usage results are based on active participants with outstanding loan balances at calendar year-end December, December, and December. Numbers may not total 100% due to rounding. C1SNTEX AX-9198 Visit troweprice.com/referencepoint 7