Average company matches to retirement plans have nearly doubled since 2011, according to the Plan Sponsor Council of America’s 60th annual survey of profit-sharing and 401(k) plans.
In 2016, employers averaged contributions of 4.7 percent of salary to standalone 401(k) plans — those employers that don’t also offer a defined benefit plan or profit-sharing plan. That’s up from 3.7 percent in 2015, and 2.4 percent in 2011.
Lower wage workers are also posting increased contribution rates, according to the study, which looked at 325 401(k) plans, and 259 employers that sponsor a profit-sharing plan alongside a defined contribution option. About 37 percent of surveyed plans had more than $100 million in assets; 38 percent had more than 1,000 participants.
The nearly 90-page report provides an exhaustive data breakout of all components of plan design and administration, and is available for purchase through PSCA’s website.
Here are five highlights looking at employer and participant contribution trends from this year’s survey. BenefitsPRO will be providing subsequent reports on trends from this year’s survey.
1. Employer contributions up considerably since financial crisis
As noted above, employer contributions are tracking at 10-year highs.
Employers pulled back the reins on contributions to plans in the wake of the financial crisis, underscoring the link between the health of private sector retirement plans and the overall economy.
In 2009, the average company match to 401(k) plans was 2.1 percent, down from 2.9 percent in 2008. In 2016, the average company contribution to 401(k)s was 4.6 percent, up from 3.8 percent in 2015, and 2.9 percent in 2013.
2. Lower wage workers saving more
Lower-paid participants, as defined by the average deferral percentage, or ADP test, contributed an average of 6.1 percent of salary in 2016, the most over the past decade and up from 5.5 percent in 2015.
The smallest plans—those with one to 49 participants—had the highest contribution rate—7.1 percent of salary—by lower-paid participants, compared to plans of all other sizes.
By comparison, higher-paid employees averaged 7 percent deferrals for all plan sizes.
3. Participation by eligible workers remains high
About 90 percent of employees at the surveyed companies are eligible to participate in their employer’s DC plan, a number that has held steady over the last decade.
“Almost all plans permit full-time salaried and full-time hourly employees to participate in the plan, and about two-thirds of plans allow part-time salaried and hourly employees to participate,” the report says.
About half of the largest plans–those with 5,000 or more participants–have no age requirement for participation. Half of small plans require participants to be at least 21 years old to participate.
4. Contributing at higher rates
On average, almost 89 percent of eligible employees have some account balance in plans.
In 2016, 85 percent of eligible participants made some contribution, when accounting for individual plan averages. That’s up from 77 percent in 2010.
5. Most employers providing a match
About 82 percent of sponsors to 401(k) and combination plans (those that also offer a profit sharing plan) provide a match to participant deferrals.
The most common type of plan design is a fixed-match—30 percent of employers report using only that formula.
Of those that use a fixed-match, 41 percent offer $0.50 on every dollar deferred, most commonly up to 6 percent of pay; and 32 percent offer a dollar-for-dollar match, most commonly up to 6 percent of pay.