Workers, Employers, Contributed to Retirement Plans at Record Rates

Retirement contribution rates reached record highs, with combined worker and employer contributions equal to 13.9% of pay in 2021, new data from the Plan Council of America show.

Workers and employers last year contributed to retirement saving contribution rates that hit records when compared to prior studies, according to data from the Plan Council of America show.

Combined retirement contribution rates hit 13.9% of pay in 2021, and employers raised their retirement contribution rate to 5.6% of pay—both all-time highs for the Annual Survey of Profit Sharing and 401(k) Plans

Among employers with a profit-sharing retirement plan, 13% increased profit sharing contributions, and 5% added to their employer match, while almost 90% of eligible workers contributed to a retirement plan, the research showed.

“As the nation emerged from the impact of the COVID-19 pandemic, benefit programs generally, and retirement savings programs particularly, were seen as a key employment differentiator,” said Hattie Greenan, director of research and communications at the council, in a press release.

Workers’ account balances averaged nearly $195,000 last year, up from $180,000 in 2020, the PSCA found.

Many employees decided to defer more to their account—at least in part prompted by their employer’s increase, Greenan added.

Employers were recovering from the myriad financial stressors of the pandemic, in 2021, according to the survey results. Many plan sponsors improved wages and benefits to aid their staff recruitment and retention efforts, the PSCA found.

In addition to contributions at record highs, 401(k) hardship withdrawals and plan loans were fewer in 2021 after a slight uptick of participants accessing their accounts during the pandemic, the survey found.

  • Plan participation grew to 89.2% in 2021, from 88.5% in , with participants deferring an average 8.3% of pay, up from 8.0% in 2020.
  • Plan distributions decreased as 1.9% of workers took a hardship withdrawal in 2021, down from 2.6% in 2020; and 18% borrowed against their account balance, down from 23.6% in 2020.

In addition to the trends noted above, plan sponsors in 2021 added features intended to boost both worker retention and savings rates, including Roth options and managed accounts, the PSCA found. The trend toward immediate vesting for matching contributions continued and has increased by 10 percentage points in the last three years, the data show. 

  • Immediate vesting of employer contributions increased to 44.2% of plans in 2021, from 41.0% in 2020.
  • Roth options were offered by 87.8% of plans last year, and the percentage of participants making Roth contributions grew to 27.7%.
  • Managed accounts were offered by 48.8% of plans, up from 43.6% in 2020.

Employers responded to the economic dislocation wrought by COVID-19 with other enhanced retirement benefits and features, education and financial wellness tools, the survey found.

PSCA data show that plan sponsors may be rethinking the purpose of financial education programs. “The primary goal of participant education has historically been to increase participation rates, but that shifted to increasing financial literacy of employees in 2020, and that shift held for 2021,” wrote the authors.

The survey found 77.4% of employers named increased financial literacy as the main goal for their financial education programing.

The second most common goal, at 73.5%, to prompt appreciation for the plan, is likely used to retain employees, according to the survey.

Due to the increasingly fierce competition for talent, many employers used the quality of their retirement benefits and financial education to distinguish their company from others, the authors wrote.

Investment advice was provided by 44.2% of plans, up from 32.3% in 2020; and 27% of plans offer a comprehensive financial wellness program, up from 26% the prior year, the PSCA data showed.

“Organizations are not just providing robust contributions and plan designs, they are also moving to support employees with increased education and financial decision-making support through wellness program and advice,” Will Hansen, PSCA’s executive director, said in the release. “These supports, along with enhanced contributions and plan designs, will help buffer savers’ account balances against any future economic downturn.”

The PSCA Survey of Profit Sharing and 401(k) Plans includes data on the 2021 experience of 557 retirement plans. Survey respondents included four profit sharing plans, 294 401(k) plans and 259 combination profit sharing/401(k) plans, according to the survey details.

The full report is available for purchase at