Hittin’ the Big 4-0 is always a time for pause, contemplation and reflection and 401(k)s are no exception. The Plan Sponsor Council of America (PSCA) took a look at the quadragenarian savings vehicle and found 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.
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 groundwork for better retirement outcomes, according to its 61st Annual Survey of Profit Sharing and 401(k) Plans.
The survey also found plan sponsors continue to add design features to increase participation and savings rates.
They include 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,” Hattie Greenan, PSCA’s director of Research and Communications, said in a statement. “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 from the survey include:
- The use of dollar-per-dollar matching above 3 percent of pay increased by nearly 50 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 (HSA) 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.