Average employee 401k deferrals (both pre-tax and Roth) in retirement plans where T. Rowe Price is the recordkeeper have continued to climb steadily over the past decade to a rate of 8.5% in 2021, the company announced this week.
On April 28 T. Rowe Price released Reference Point, its annual 401k benchmarking report featuring year-over-year data and analysis on participant behavior and plan design. The report is based on the firm’s full-service recordkeeping client data.
Market growth resulted in 401k account balance increases across every age group—up 8% from an average of $113,900 in 2020 to a record high of $123,500 in 2021.
“Throughout these unprecedented times, plan sponsors and participants continued to take positive steps that show they realize the value of retirement savings programs.”
Kevin Collins, T. Rowe Price
“In February 2020, when the markets started reacting to the growing pandemic, there were a lot of questions about the impact COVID-19 would have on the retirement plan industry and the participants who rely on it,” said Kevin Collins, head of Retirement Plan Services at T. Rowe Price. “We have an answer two years later and it’s a positive one: throughout these unprecedented times, plan sponsors and participants continued to take positive steps that show they realize the value of retirement savings programs.”
To illustrate this point, the report found that 401k plans that couple auto-enrollment and auto-increase together achieve an 85% participation rate compared with only 29% for those that do not offer the services—nearly three times greater participation.
Further, after two years at 50%, the percentage of auto-enrollment plans with an auto enrollment default rate of 5% or more increased to 52%.
“The data from 2021 is encouraging,” added Collins. “Plans sponsors can continue to support these positive behaviors by offering financial wellness programs and implementing strategic plan design features to help ensure their participants stay on this path.”
More key findings from the report include:
• Participation in 401k plans increased from 67% in 2020 to 68% in 2021.
• The percentage of plans offering a match returned to pre-pandemic rates or higher.
• Participant usage of Roth deferrals has increased 57% since 2018.
• The percentage of participants with outstanding loans decreased from 20% in 2020 to 18.8% in 2021.
Reference Point is an annual client data benchmarking report so plan sponsors can review trends and benchmark their progress and participant behavior across the firm’s client base. Data are based on the large-market, full-service universe of T. Rowe Price Retirement Plan Services, Inc. retirement plans (401k and 457 plans), consisting of 660 plans and over 2 million participants, from January 1, 2021 through December 31, 2021.
Baltimore, Md.-based T. Rowe Price is independent global asset management company with $1.55 trillion in assets under management as of March 31, 2022. The company has been a retirement solutions provider for more than 30 years.
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