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Defined Contribution

PSCA: 401(k) participation up, as well as contributions

More employees are participating in their 401(k) plans and increasing the amounts they're contributing to them, according to the latest survey from the Plan Sponsor Council of America.

More than 4 of 5 employees (84.9%) are contributing to their 401(k)s, up from 76.9% in 2010. The average deferral rate is also up. In 2017, employees contributed an average of 7.1%, the highest deferral rate since 2010 when it was 6.2%, according to the PSCA.

Companies, too, are opening their purse strings, contributing an average of 5.1% to 401(k) plans and combination profit-sharing/401(k) plans, up from 3.7% in 2008.

"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," said Hattie Greenan, PSCA's director of research and communications, in a statement.

The use of automatic enrollment hit new highs with 61.2% of plans offering the feature. The most common default deferral rate is 3%, which is used by 32% of plans; followed by 6%, which is used by 23.8%. Only 2% use a default deferral rate of 6% or more, according to the survey results.

More plan sponsors are also allowing Roth 401(k) contributions, with 69.6% of plans offering the feature, almost double the 36.7% that did so in 2008.

Target-date funds, too, continue to rise in popularity. More than 7 in 10 plans (70.6%) offer the funds, up from 57.7% in 2008.

The study surveyed seven profit-sharing plans, 345 401(k) plans and 253 combination profit-sharing/401(k) plans.