Survey of Large Plans Shows Small Decrease in Plan Assets in 2000, Says CIEBA of AFP

BETHESDA, MD -- NOVEMBER 27, 2001 -- Year-end assets in both traditional defined benefit (DB) and defined contribution (DC) plans -- including 401(k) plans -- declined during calendar year 2000, according to a recent survey of its members conducted by the Committee on the Investment of Employee Benefit Assets, an affiliate of the Association for Financial Professionals (CIEBA of AFP). The decline in assets affected DC plans more, which dropped eight percent compared to three percent for traditional plans. Poor market returns contributed significantly to this new decline.

"The small decrease in the pension assets of large plans should not be cause for concern by workers or retirees," said Robert Angelica, CIEBA chairman. "Overall, the pension system is sound. Large companies continue to rely on traditional pension plans to provide the foundation for their employees' retirement security," he added.

The CIEBA survey covered more than 115 corporate plan sponsors with over $1.3 trillion in assets. This total includes $884 billion in defined benefit plan (traditional) assets and $509 billion in defined contribution plan assets, providing benefits for more than 16.5 million participants and beneficiaries.

Survey Highlights
Virtually all (99 percent) of CIEBA's members offer both DB and DC plans, and DB plans continue to represent the primary plan type for CIEBA members. These types of plans had 66 percent more assets, covered 74 percent more participants and paid out 18 percent more in benefits compared to DC plans.

Although DB plans continue to be the dominant plan type for CIEBA members, the number of participants in DC plans continues to increase at a significantly faster rate than in DB plans.

Under a DB plan, the employer commits to provide a specified level of benefits to plan participants.  In the private sector generally, plan sponsors pay for these benefits, directly manage investment of plan assets and bear any investment risk. (Basic benefits in DB plans are federally insured.)

Under most DC plans -- particularly 401(k) plans -- employees provide much or all of the funding, although the employer may and commonly does provide a match for employee contributions. In many 401(k) and other DC plans, plan participants direct the investment of their accounts among a number of investment choices.

Other findings of the survey include:

• DB plan benefit payments continued to represent about six percent of year-end assets for the sixth consecutive year, while DC plan benefit payments represented nine percent of year-end assets, exceeding contributions for the sixth consecutive year.
• Both DB and DC plans were substantially invested in equities. DB plans had 60 percent allocated to equities; DC plans had approximately 70 percent in equity investments of all types.
• At year-end, 17 percent of DB plan and 16 percent of DC plan assets were managed internally. Most DB plan assets (81 percent) were actively managed, while 42 percent of DC plan assets had active management.
• DC plan contributions averaged almost $6,000 per active employee with 30 percent provided in employer match.
• Participation in DC plans by eligible employees continued to increase, reaching 85 percent in 2000.
• The percentage of plan sponsors using Web sites to communicate with plan participants increased significantly -- from 66 percent in 1999 to 86 percent in 2000.
• While more than 80 percent of plan sponsors provided some type of investment education, access to investment advice was limited. Less than 30 percent of the surveyed companies make individual financial planning available and only 21 percent provided some type of interactive software advisory program.

The Committee on Investment of Employee Benefit Assets, better known as CIEBA, is the voice of the Association for Financial Professionals (AFP) on employee benefit plan asset management and investment issues. CIEBA represents more than 120 of the country's largest pension funds today and became affiliated with AFP in the spring of 2000. CIEBA's members manage more than $1.3 trillion of plan assets, representing 16.5 million plan participants and beneficiaries.

The Association for Financial Professionals in Bethesda, Maryland, supports more than 14,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, financial tools and publications, career development, certifications, research, representation to legislators and regulators, and the development of industry standards.

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