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In Wake of COVID-19, Retirement Savings Surge

After the financial impact of COVID-19, companies and participants contributed at record levels in 2021.

Arlington, VA (Dec. 13, 2022) – Benefits have long been a powerful recruiting and retention tool, and in the midst of a tight labor market, the Plan Sponsor Council of America’s 65th Annual Survey of 401(k) and Profit Sharing Plans found record high rates or retirement savings alongside innovative plan designs.

The survey found participant and employer contribution rates were at all-time highs in 2021 with a combined average savings rate of 13.9 percent of pay, and 2021 saw the highest employer contribution rate in the history of the survey (5.6 percent of pay).  Not only did most employers make planned contributions in 2021, 13 percent increased profit-sharing contributions, and five percent increased the match. Nearly 90 percent of eligible participants made plan contributions, with an average deferral rate of 8.3 percent of pay.

“As the nation emerged from the impact of the COVID-19 pandemic, benefit programs generally, and retirement savings programs particularly, were seen as a key employment differentiator,” said Hattie Greenan, director of research and communications for PSCA. “With the support and encouragement of employer contributions, workers responded in kind, enhancing their long-term retirement security.”

Not only were contributions at record highs, hardship withdrawals and plan loans were down after a slight uptick of participants accessing their accounts during the pandemic. The combination of increased contributions and decreased withdrawals bolstered average account balances to nearly $195,000, up from $180,000 in 2020.

  • Plan Participation Up: 89.2 percent of eligible employees made contributions to the plan in 2021 (up from 88.5 percent in 2020) with an average deferral rate of 8.3 percent of pay (up from 8.0 percent in 2020).
  • Distributions Down: Just 1.9 percent of participants took a hardship withdrawal in 2021 (down from 2.6 percent in 2020 and 18 percent borrowing against their account balances (down from 23.6 percent in 2020).

Design Signs

Plan sponsors also continue to add plan design features designed to boost both worker retention and savings rates including moving towards immediate vesting (10-point jump in three years), an increase in Roth availability, auto-enrolling at a rate high enough to obtain the full match, and increasing availability of managed accounts.

  • Vesting: The use of immediate vesting increased from 41.0 percent in 2020 to 44.0 percent of pay in 2021.
  • Roth: Roth availability continues to climb and is now an option in 87.8 percent of plans; additionally, the percentage of participants making Roth contributions increased to 27.7 percent. Nearly 60 percent allow in-plan Roth conversions.
  • Managed Accounts: Nearly half of plans offer managed accounts (48.8 percent), up from 43.6 percent in 2020.

In addition to strengthening plan designs, employers are providing education focused on increasing financial literacy, and more are providing investment advice and financial wellness programs.

  • Education Priority: The most common reason for providing plan education is to increase overall financial literacy (77.4 percent of plans).
  • Investment Advice: 44.2 percent offer investment advice, up from 32.3 percent last year.
  • Financial Wellness: Twenty-seven percent of organizations offer a comprehensive financial wellness program, including more than half (55.4 percent) of large plans.

“Organizations are not just providing robust contributions and plan designs, they are also moving to support employees with increased education and financial decision making support through wellness program and advice,” said Will Hansen, PSCA’s executive director and the chief government affairs officer for the American Retirement Association. “These supports along with enhanced contributions and plan designs will help buffer savers’ account balances against any future economic downturn.” 

About the Survey
PSCA’s 65th Annual Survey of 401(k) and Profit Sharing Plans reports on the 2021 plan-year experience of 557 plans.  The full report is available for purchase at: Media copies can be requested at [email protected]