Employees and employers cut back on 401(k) contributions in 2022 because of rising costs and fears of a recession, according to the Plan Sponsor Council of America's latest annual survey of 401(k) plans released Nov. 16.
In 2022, employees contributed an average of 7.4% of their pay to their 401(k)s, down from 8.3% in 2021.
The drop marks a reversal from previous years as employee contributions have been rising or remained flat since 2014, according to PSCA data.
Employer contributions also swooned, dropping to an average of 4.8% from a record high of 5.6% in 2021.
"After record contribution rates from participants and employers in 2021, contributions dipped across the board in 2022, as expected, as the economy wrestled with high inflation and many were bracing for an expected recession," PSCA wrote in the report.
Employee plan participation also took a hit. In 2022, the percentage of eligible employees making contributions to their plans was 85.6%, down from 89.2% the year before.
One bit of good news revolved around the growing availability of automatic enrollment. Nearly two-thirds of plans (63.9%) now have an automatic enrollment feature, up from 58.8% in 2021.
"Despite economic challenges, plan sponsors moved forward in implementing design features to support participants," said Will Hansen, PSCA's executive director, in a press release.
The survey was based on 393 401(k) plans and 294 combination profit-sharing and 401(k) plans.