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EBRI/ICI 401(k) Database Findings:

Preliminary findings for 1999 and 2000 comparing constant participants (those who had an account in both years) in the EBRI/ICI 401(k) database—the largest of its kind in the nation—show that the average account balance declined only 0.1 percent last year, and that individual results for 401(k) participants varied greatly based on age. Participants in their 20s posted average 401(k) account growth of 26.9 percent last year, while participants in their 50s saw their average account balance decline by 2.3 percent (a table with results by age is at the end of this release).

The EBRI/ICI database, formally known as the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, holds data from a variety of plan record keepers and administrators, covers all size plans, and is representative of the 401(k) plan participant universe. One of the ways the database is unique is that it tracks account activity on a year-to-year basis of individual participants, rather than doing sample data collection from different participants each year.  Data are presented on 8.3 million participants present in the database for both 1999 and 2000.

Preliminary analysis of year-end 2000 401(k) plan participant data collected in the EBRI/ICI database finds that the average 401(k) account balance of participants present in both 1999 and 2000 declined only slightly in 2000.  At year-end 2000, the average account balance of the 8.3 million participants in this consistent set stood at $58,774, or only 0.1 percent below the average of $58,850 at year-end 1999.

A key point in the EBRI/ICI data released today is that even an aggregate figure relating to the participants who were present in both years does not tell the whole story.  That’s because a change in a participant’s account balance is the sum of three factors:

• New contributions by the participant and the employer.
• Total investment return on account balances, which depends on the performance of financial markets and on the allocation of assets in the individual’s account. 
• Withdrawals, borrowing, and loan repayments.

The relative importance of these three factors varies from individual to individual, and in the consistent group of 8.3 million participants in the EBRI/ICI database, the change in account balance varied considerably with age.  For example, the average account balance of participants in their 20s rose.

26.9 percent in 2000, while the average account balance of participants in their 60s fell about 5.8 percent.  That’s because, for younger participants, contributions are of greater importance in percentage terms than are other factors, since these participants’ account balances tend to be small compared with the amounts typically contributed.  In contrast, for older participants, investment return is of greater importance because their account balances tend to be large relative to their annual contributions.

Use of a consistent group of participants removes the effect on the overall average account balance caused by new participants entering and by exiting participants.  Preliminary analysis of the average account balance (net of plan loans) for all participants in the EBRI/ICI databases—in addition to those present in both years—shows a decline of 12 percent in 2000 to $48,988 from $55,502 in 1999.  However, this average decline does not measure how the balance of the “typical” 401(k) participant changed in 2000.

“These results illustrate why it’s often risky to rely on ‘average’ numbers, which are too often the only thing that’s reported,” said Dallas Salisbury, president and CEO of EBRI. “The EBRI/ICI 401(k) database shows that individuals’ personal experience is often very different from the average—and in this case, that’s mainly due to the age of the 401(k) participant.”

Full results of the year-end 2000 EBRI/ICI analysis will be published later this year. Year-end 1999 results are available on both organizations’ Web sites, www.ebri.org and www.ici.org

Source: Tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project.

The Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) have been collaborating for the past four years to collect data on participants in 401(k) plans. This effort, known as the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, has obtained data for 401(k) plan participants from certain of EBRI and ICI members serving as plan record keepers and administrators.

The EBRI/ICI database is representative of the 401(k) plan participant universe, as it pulls data from a variety of plan record keepers and administrators and covers a wide range of plan sizes. The year-end 1999 data provided information on 10.3 million active participants in 32,674 plans with $573.4 billion in assets. The 1999 EBRI/ICI database accounts for 11 percent of all 401(k) plans, 26 percent of all 401(k) participants, and about 35 percent of the assets held in 401(k) plans.

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