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 of 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% of pay, and 2021 saw the highest employer contribution rate in the history of the survey (5.6% of pay). Not only did most employers make planned contributions in 2021, 13% increased profit-sharing contributions, and 5% increased the match. Nearly 90% of eligible participants made plan contributions, with an average deferral rate of 8.3% of pay.
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 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.
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.
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: https://www.psca.org/research/401k/65thAR.
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In Wake of COVID-19, Retirement Savings Surge – National Association of Plan Advisors