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40 Years On, 401(k) Contributions Climb to Record Levels

Increases in employer contributions and plan design enhancements such as automatic enrollment and contribution acceleration are building a better retirement foundation.

12/11/2018

Contact:
Hattie Greenan
312-419-1863
hattie@psca.org

As the 401(k) commemorates its 40th anniversary, new research from the Plan Sponsor of America (PSCA), part of the American Retirement Association (ARA), finds that employers are contributing an average of 5.1 percent of pay to their employees' 401(k) accounts, the highest ever recorded in the history of the survey, the longest running of its kind.  

This rate of contribution, combined with an average savings rate by participants of 7.1 percent, gives a total savings rate of more than 12 percent – laying the foundation for better retirement outcomes, according to the 61st Annual Survey of Profit Sharing and 401(k) Plans.

The survey also found that plan sponsors continue to add design features to increase participation and savings rates, such as the availability of Roth contributions, which has doubled in the past decade and is now available at 70 percent of all plans – including small plans, which once lagged large plans in its adoption. Employers continue to embrace automatic enrollment, and more than half now do so with default deferral rates above the traditional three percent threshold – twice as many as a decade ago. 

“The nation’s best employers have long appreciated the value in offering a workplace retirement plan,” noted Hattie Greenan, PSCA’s Director of Research and Communications.  “Design enhancements that leverage behavioral finance insights such as automatic enrollment, coupled with generous employer matching contributions, are helping build a more financially secure retirement for America’s workers.”

Additional Highlights:

  • The use of dollar-per-dollar matching above three percent of pay increased by nearly fifty percent from 24.1 percent in 2016 to 35.8 percent in 2017. 
  • More than 61.2 percent of plans now use automatic enrollment to boost participation.
  • The availability of health savings accounts (HSAs) continues to rise, now offered at 64.9 percent of companies.
  • Nearly three-fourths (73.1 percent) of plans now retain an independent investment advisor to assist with fiduciary responsibilities - up from 69.5 percent in 2016. 
  • The use of mobile technology to provide plan services to participants has doubled since 2014 and is now used by 43.6 percent of companies.

The 61st Annual Survey of Profit Sharing and 401(k) Plans also covers topics such as monitoring investment policy statements, alternative investment options, company stock, distribution and withdrawals, participant education and communication, recordkeeping and other plan administration practices. The report includes a comprehensive executive summary that examines the 10-year trends of key plan benchmarking data points. To connect with research director Hattie Greenan about the survey’s findings, email hattie@psca.org. 

About the Survey
PSCA’s 61st Annual Survey reflects the 2017 plan-year experience of 605 DC plan sponsors. The full printed survey is available for pre-order (electronic copies are available now).

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The Plan Sponsor Council of America (PSCA) is a diverse, collaborative community of employee benefit plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change, and expand on the success of America’s voluntary, employer-sponsored retirement system. With members representing employers of all sizes, PSCA offers a forum for comprehensive dialogue. By sharing our collective knowledge and experience as plan sponsors, PSCA also serves as a resource to policymakers, the media, and other stakeholders as part of its commitment to improving retirement security for millions of Americans. For more information, visit www.psca.org.