The combined employer and employee 401(k) contribution rate fell to 12.1% in 2022—down notably from the record high 15.3% percent in 2021—according to the just-released latest survey of 401(k) plans from The Plan Sponsor Council of America (PSCA).
The new research found 401(k) participants contributed an average of 7.4% of pay, and companies contributed 4.8% on average for the employer match. Participation rates also dipped, with 85.6% of eligible employees making contributions, down from 89.2% in 2021. It was 88.5% in 2020.
A press release from PSCA said that “although participation and contribution rates slipped, they didn’t fall—participation remains strong, coming down from record highs to levels we have seen within the last few years.”
Though the average employer contribution slipped to below 5% of pay, most companies continued to make contributions (96.2% made planned matching contributions).
“Last year we stated that the strength of the system going into 2022, with record levels of contributions and adoption of participant support designs, would help buffer retirement savings against any economic downturn—for now that seems to be the case,” said Hattie Greenan, director of research and communications for PSCA.
Plan design
Roth after-tax contributions are now available in 90% of plans. Though only 12.4% of plans will be allowing Roth treatment of employer contributions as allowed under SECURE 2.0, 40% are still considering it, and nearly 60% currently allow in-plan Roth conversions.
Automatic enrollment availability increased in 2022 and is now used in 64% of plans. The use of automatically reenrolling nonparticipants annually has increased over the last 10 years and is a trend to watch, the PSCA release said.
“Despite economic challenges, plan sponsors moved forward in implementing design features to support participants—features that have become best practices over the last several years continue to take hold” said Will Hansen, PSCA’s executive director. “We also saw an increased focus on investments as employers are thoughtfully considering the best options for their participants for long term financial success.”
Investments
More plan sponsors are using an independent investment advisor to help with fiduciary responsibility—83% of plans, up from 76.8% in 2021. There was also a slight uptick in the availability of retirement income products and ESG funds (though availability is still low), and large plans seems to be adding professionally managed accounts as an option for participants.
The survey found 6.4% of plans offer an ESG fund, up from 4.2% in 2021. Further, 10.8% offer an in-plan lifetime income product, up from 8.1% in 2021.
More survey highlights
- Financial literacy: The priority for retirement plan education was financial literacy for the second year in a row, indicated by 83% of organizations and up from 77% in 2021.
- Mobile technology: 85% of large plans provide retirement plan transactions via mobile technology.
PSCA’s 66th Annual Survey of 401(k) and Profit Sharing Plans reports on the 2022 plan-year experience of nearly 700 plans. More information can be found at: https://www.psca.org/research/401k/66thAR.
The Plan Sponsor Council of America, part of the American Retirement Association (ARA), is a diverse, collaborative community of employee benefit plan sponsors.
SEE ALSO:
• 401(k)s Saw Record-High Contribution Rates Last Year: PSCA
• Higher Numbers of HSAs Positioned as Retirement Savings Strategy
• IBM Replacing 401(k) Match with 5% ‘Retirement Benefit Account’ Contribution
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.