Participants in 403(b) plans deferred more to their accounts and increased their rate of participation last year vs. 2018, according to a report published Wednesday by the Plan Sponsor Council of America and Principal Financial Group.
The report, based on an annual survey, showed that 76.6% of participants contributed to their plans last year vs. 72% in 2018.
"A quarter of plans now use automatic enrollment, including nearly 40% of large plans," said Hattie Greenan, PSCA's director of research. "This coupled with education efforts and the focus on retirement outcomes is certainly moving the needle in the right direction."
The report said 80.4% of participants maintained an account balance vs. 81% in 2018.
The average annual deferral rate rose to 7.2% of pay last year vs. 6.6% in 2018 and 6.3% in 2017, the report said.
"Education is certainly part of it (because) the issue of retirement readiness and the need to save more has been a consistent theme for a while now," Ms. Greenan said. "We're also seeing the use of higher default deferral rates in plans with automatic enrollment."
Among plans using automatic enrollment, 45.9% used a default rate of more than 3% of pay vs. 37.7% of these plans in 2018. "We're seeing plans re-evaluating the default savings rates" beyond what has been the common 3% rate, Ms. Greenan said.
The report also noted that for the first time in the survey's 12-year history, plan sponsors didn't say increasing participation was their primary goal for providing plan education. Retirement planning (34.8% of responses) was the top-ranked remark.
"There has been an increased focus on retirement outcomes for a few years as participation in plans has become commonplace, Ms. Greenan said. "Along these lines, a quarter of 403(b) plan sponsors now provide holistic financial wellness programs."
She added that the increased adoption of automatic enrollment "mitigates the need to focus on participation," which placed second with 30.7% of responses. Participation is still "a very important aspect" of education efforts, she said.
The survey was based on responses from 393 plan sponsors for which 12.7% had 1,000 participants or more and 23.2% had between 200 and 999 participants. The rest had 199 or fewer participants.