Auto-enrollment bolsters employee savings
#1
In 2023, a record-high 59% of plans offered automatic enrollment, which research has shown improves participation rates. Larger plans were more likely than smaller plans to implement automatic enrollment, with 74% of larger plans using the feature. Among auto-enrollment plans, 60% defaulted employees at a deferral rate of 4% or higher, an all-time high. Ten years ago, only 35% of plans defaulted employees into the plan at a rate of 4% or higher. More participants than in any previous How America Saves report (43%) increased their savings rate in 2023, driven in part by plan design features like automatic annual savings increases.
Managed accounts’ advice is more accessible
#2
For their participants who need help with investing and planning decisions, plan sponsors are increasingly offering managed account advice services. The percentage of plans offering managed account advice is at an all-time high, and more than 3 in 4 participants now have access to advice. Additionally, a record-high number of participants with access to advice enrolled in the service in 2023.
96% of plans offer target date funds
#3
Employers helped workers invest long-term in 2023: 96% of plans offered target date funds in 2023, while 58% of participants are pure TDF investors. Only 1% of investors who invest exclusively in a single target-date fund traded in 2023. A record-high 64% of all 2023 contributions went into target-date funds, which many employers offer as an automatic or default investment strategy.
401(k) loan activity decreased
#4
During 2023, loan use increased slightly from 2022, however, it remained below the typical use rates of the years before COVID-19. Thirteen percent of participants had a loan outstanding, and the average loan balance was about $10,700. Hardship withdrawals rose from 2.8% in 2022 to 3.6% of participants in 2023, meaning more than 96% did not take a hardship withdrawal last year. Some plan sponsors impose loan-issuance waiting periods to discourage repetitive loans. In 2023, 4% of plans required a waiting period—most commonly one month—after a loan was paid off before a new loan could be taken by the participant.
