Assets held by private pension plans in 1994 totaled $2.299 trillion, a slight decrease from the $2.316 trillion reported in 1993. While defined contribution (DC) plan assets increased by 1.8% in 1994 to $1.088 trillion, this increase was more than offset by a 3.0% decline in defined benefit (DB) plan assets to $1.211 trillion. This was only the second time since annual reporting under ERISA commenced in 1975 that total plan assets declined. 

The 1.8% increase in DC plan assets was lead by a 9% increase in assets held by 401(k) type plans, from $616 billion in 1993 to $675 billion in 1994. Assets held in non-401(k) DC plans were down by 9% from $452 billion in 1993 to $413 billion in 1994. 

In addition to the increase in 401(k) plan assets, the number of 401(k) type plans and plan participants also expanded at a robust pace. The number of 401(k) type plans increased by 13% to 175,000, with the number of active participants increasing by 9% to 25.2 million. The increase in 401(k) type plans resulted not only from the establishment of new plans, but also from the amendment of existing defined contribution plans to include a cash or deferred arrangement. 

Other findings from the Form 5500 series reports filed for 1994 plan years are summarized below:

  • The count of private pension plans filing Form 5500 reports in 1994 was about 690,350, a 2% decrease from 1993. It is unclear whether this slight drop in the count of processed Form 5500 filings from 1993 to 1994 represents an actual decrease in the number of pension plans. During the processing period for 1994 forms, delays were incurred both as a result of the government shutdown during part of the last quarter of calendar year 1995 and from tight budgetary restraints imposed on the processing effort. These combined delays appear to have resulted in somewhat less than a full year’s worth of 1994 forms being processed.

  • The number of DB plans decreased by 11% to 74,400, while the number of DC plans decreased by less than .5% to 615,900. The number of DB plans has decreased each year since 1986 and the 1994 count is only 43% of the peak total of 175,000 plans in 1983.

  • Total active participants in private pension plans increased slightly from 64.7 million in 1993 to 65.0 million in 1994. The long term patterns of decreases in DB plan active participants and increases in DC plan active participants continued in 1994, with DB plan active participants decreasing by 2% to 24.6 million and DC plan active participants increasing by 2% to 40.4 million.

  • While the number of DB plan active participants has been steadily decreasing each year, the number of DB plan retirees has been increasing. In 1994, 8.4 million retired or separated participants were drawing benefits from DB plans. In DB plans over the last five years, retired participants increased from 22% to 26% of active participants, reflecting the aging of the workforce in many of the large unionized manufacturing firms where DB plans predominate.

  • The total active participant count of 25.2 million in 401(k) type plans raised the percentage of all DC active participants in 401(k) plans to 62%. Among plans with 100 or more participants, about 40% of the net increase in active participants in 1994 was due to the adoption of a 401(k) feature by DC plans which were not 401(k) plans in 1994. An additional 35% of the increase in 401(k) plan participants from 1993 to 1994 was due to the establishment of new plans, and the remaining 25% was due to an increase in participants covered by 401(k) plans existing in 1993.

  • The decrease in pension plan assets in 1994 resulted from a negative cash flow (contributions minus benefit payouts and administrative expenses) which more than offset the positive investment earnings on plan assets. The net cash flow in 1994 was -$27.0 billion. The net cash flow was -$48.6 billion for DB plans and $21.6 billion for DC plans.

  • Benefit payments from plans increased by 5% in 1994 to $163.9 billion. Benefits paid out by DB plans increased by 4% to $82.6 billion and benefit payments from DC plans increased 5% to $81.3 billion. The increase in benefit payouts from DB plans results primarily from the increase in the number of retirees receiving benefits. For DC plans, the growing coverage rate has led both to an increase in the number of retirees receiving benefits and an increase in the number of workers changing jobs and withdrawing their vested account balances.

  • Total plan contributions decreased 6% from $153.6 billion in 1993 to $144.4 billion in 1994.

  • Contributions to defined benefit plans, after a continuous increase from 1990 to 1993, decreased by 25% from $52.1 billion in 1993 to $39.0 billion in 1994. Even with the substantial decrease from 1993, the 1994 contribution total was the second highest since 1985. The 1993 spike in contributions resulted primarily from an unusually high contribution of $15.3 billion to the General Motors Hourly Plan.

  • Defined contribution plans received $105.3 billion in contributions during 1994, a 4% increase over 1993. The percentage of total DC contributions made by plan participants has been steadily increasing over the last decade and in 1994 was about equal to employer contributions to DC plans.

  • About 91% of all employee contributions to DC plans in 1994 were paid into 401(k) type plans compared to 53% of all employer cash contributions to DC plans.

  • Among plans with 100 or more participants, the aggregate rate of return in 1994 was 2.9%. This was the lowest rate of return over the 10 year period for which rates of return have been calculated from Form 5500 reports, and was well below the average annual rate of return of 10.3% for the 1985-94 period.

  • Defined contribution plans achieved an aggregate rate of return in 1994 of 3.8% compared to 2.2% for DB plans. Among DC plans the aggregate rates of return were similar in 1994 for both single employer and multiemployer plans. Among DB plans, multiemployer plans had an aggregate rate of return of 4.5% compared to 1.8% for single employer plans.

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