Participants in defined contribution plans are increasingly contributing enough to take full advantage of employer matches, thanks to plan design changes and a greater emphasis by employers on targeting communications to those who are falling short.
Despite the progress, sponsors and researchers concede there's a persistent percentage of participants who contribute below the employer match threshold for reasons ranging from salary to tenure to age.
Only 4% of employers don't provide any contribution to participants, said an annual survey by Vanguard Group Inc., Malvern, Pa., covering 2017, of its record-keeping clients. Forty-four percent provide a matching contribution, 11% provide a non-matching contribution and 41% offer both matching and non-matching contributions.
"We keep chipping away," said Annette Grabow, retirement program manager for the Charleston, S.C.-based Sonepar USA, noting the company's overall annual employee deferral rate is now 5.94%, or just below the corporate match of 50 cents per dollar up to 6% of annual pay.
"We're making progress but it's a slow process," said Ms. Grabow, whose company 401(k) plan has $712 million in assets.
Annual reports by Alight Solutions, Lincolnshire, Ill., a record keeper whose clients are primarily very large plans, show steady improvement in recent years among the percentages of participants contributing enough to meet or exceed their employer matches. It was 80% last year (50% exceeding and 30% meeting the match), representing a steady overall improvement since 2013's figure of 73% (43% exceeding and 30% meeting), according a report, published in May, that covered 127 DC plans record-kept by Alight with more than 3 million participants. Ninety-nine percent of Alight's clients offer some form of match.
Age, salary and tenure had a direct link to participants exceeding, meeting or falling below the employer match, the Alight report said.
Among five age groups, the highest percentage of workers contributing below the match was in the 20-29 group, and the lowest percentage was in the 60-plus group. The latter group had the highest percentage of workers exceeding the match; the former group had the lowest percentage.
The same trend was evident among five salary classes. The highest percentage of employees contributing below the match was in the $20,000-$39,000 group; the lowest percentage was in the $100,000-plus group. The latter group had the highest percentage of workers exceeding the match; the former group had the lowest percentage.
Tenure also figured prominently in Alight's match analysis. The shorter the tenure, the higher the percentage of workers failing to meet the match. The longer the tenure, the higher the percentage of workers exceeding the match.