ASPPA sister organization Plan Sponsor Council of America (PSCA) is out with its latest survey of 401(k) plans. It finds that after record contribution rates from participants and employers in 2021, plan contributions dipped in 2022.
However, although participation and contribution rates slipped, they nonetheless remain strong.
PSCA previously predicted 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 economic downturn—which appeared to be case.
Contributions
Nearly 90 % of eligible employees had 401(k) accounts and 85.6% made contributions in 2022. The combined employer and employee contribution rate was 12.1% (down from 15.3% in 2021). Though the average employer contribution slipped to below 5% of pay, most companies continued to make contributions (96.2% made planned matching contributions).
Plan Designs
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 enrolment 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 as we continue to see use of that feature expand.
“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 seem to be adding professionally managed accounts as an option for participants.
Survey highlights include:
- Participation: 85.6% of eligible employees made contributions, down from 89.2% in 2021.
- Contribution rates: Participants contributed an average of 7.4% of pay, and companies contributed 4.8% average employer contribution.
- 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.
- Investments: 6.4% of plans offer an ESG fund, up from 4.2% in 2021 and 10.8% offer an in-plan lifetime income product, up from 8.1%.
- 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.
Media copies can be requested at [email protected].
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