A comprehensive review of the small pension plans in the US

Did you know that small pension plans with less than 120 participants account for only 0.05% of the total retirement assets! The retirement industry on a whole boasts of about $15 trillion in assets as of the beginning of 2016, spread across 784,151 pension and welfare plans. However, 626,877 plans account for only $810 billion in assets. This statistic probably tells us that most pension plans are relatively small in terms of financial assets that they hold. This is probably why the government feels the need to increase regulation in this sector to ensure that advisory and administration fees remain in check.

Interesting fact 2: Surprisingly, the business type that accounts for the largest number of the total pension plans is the office of physicians followed closely by dentists and lawyers!

Read on to uncover interesting insights from the small plan world as we cut and slice data from the Form 5500’s and piece it together in this report. Click here if you want to know more about getting a pension plan for yourself.

Data Definition

Any analytical process involving data should first start with defining the data set. We set out with the objective of focusing on small pension plans which typically are never in the spot light enjoyed by the large pension plans. So we shortlisted all pension plans with more than one but less than 120 participants during plan year 2015. This is the latest available data set as the information for plan year 2016 won’t be complete until September 2017.

We used advanced techniques to piece together information from 626,877 plans representing 80% of the pension plans filing the Form 5500 annually. Please read our disclaimers at the end of the report.

Total Assets in the plans

80% of all pension plans in the US hold $810 billion in assets as of the end of plan year 2015. This amount includes both employer contributions as well as employee contributions. Total employer contributions during 2015 were $31.94 billion while employee contributions were higher at $35.3 billion. Employer contributions are contributions made to a profit sharing, defined benefit plan or a floor offset plan by the employer. Employee contributions are like 401(k) or Roth deferrals made by the employees themselves but deposited in the company pension plan.

Contributions by participants

A total of 9.8 million people were eligible to participate in plans in which employee contributions like 401(k) are permitted and a total of $35.3 billion was contributed during the year. That means participants in these plans contributed an average of $3,600 during the year. Though this number seems high, anecdotal evidence suggests that participants with lower compensation rarely contribute to a 401(k). The $3,600 amount probably suggests that a relatively small number of highly compensated employees defer the maximum bumping the average higher. The maximum amount that could be deferred in a 401(k) plan by an individual in 2015 was $18,000.

States with most companies sponsoring pension plans

It may not surprise many that California, with its business vibrancy, has the most pension plans than any other state. New York, with its financial muscle, comes in at second place. What definitely is a surprise is that California has almost 75% more pension plans than New York! Below are the top five states and the number of small pension plans:

Top States in the US with most Pension Plans

 

 

 

 

See our chart at the end with a listing by state of all plans included in our data set.

Businesses those are most likely to sponsor pension plans

Someone already working in the pension plan industry might definitely know which small business is most likely to sponsor a pension plan. Yes, it is physicians and medical practices! The second most likely business is that of a dentist and a law firm is in the third place.

Below is a list of top ten businesses sponsoring a pension plan:

Business Entities with the most number of Pension Plans in the United States

 

 

 

 

 

 

 

 

We also wanted to find out the total assets by each business type.

Business entities with the most number of pension plans and the amount of assets

 

 

 

 

 

 

 

 

 

 

 

If we piece together the two tables above, we get a brief idea about how rich the pension plans are for each business type. For example, the plans sponsored by law firms represent only 5.48% of the total pension plans, but hold as much as 8.22% of the total assets. This is in contrast to personal and laundry services industry which sponsors 1.81% of the total plans but has only 0.8% of the total assets.

Business entities with a percentage of pension plans and percentage of assets

 

 

 

 

 

 

 

 

 

 

 

 

Types of Plans

Finally, we decided to analyze the number of plans that offer a particular feature like 401(k) or profit sharing. 87% of the plans use a pre-approved plan document which saves time and money for the plan sponsors. 78.9% of the plans offer the 401(k) option which allows the employees to defer some income each month.  88% of the plans offer a profit sharing option which enables the employer to make a discretionary contribution each year. Surprisingly, only 3.9% of the plans have an automatic enrollment feature.

Types of plans by features

 

 

 

 

 

 

 

 

 

Please feel free to email us at info@pensiondeductions.com. If you are a news reporter or a web administrator and are looking for some specific data, we would be happy to perform the analysis for you and update it on this report.

number of plans in the US distributed by statesnumber of plans in the US distributed by states

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disclaimer: All analysis is based on publicly available information from the Form 5500 made available by the Department of Labor. Please note, any other data analyst could draw different conclusions from a similar data set. We do not validate the completeness or correctness of the information on individual Form 5500’s. This analysis is purely from an academic perspective and other parties are not advised to make financial decision based on our interpretations.

Sources: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500