Study examines 401(k) plan employer contributions

July 20, 2021

Findings from a recently released study conducted by the Investment Company Institute (ICI) and BrightScope showed employer contributions to be common in 401(k) plans.

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“The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2018” revealed in 2018, 87 percent of large 401(k) plans covering more than 90 percent of 401(k) participants had employer contributions.

“The employer matching contribution is one of the most important features of the 401(k) system,” ICI Senior Director of Retirement and Investor Research Sarah Holden said. “These contributions help employers provide a competitive benefit option to attract workers and directly support employees in building their retirement nest eggs.”

Employers can match employee contributions or make contributions regardless of employee contributions, citing a match formula in which employee contributions are matched up to a fixed percentage of salary.

Per the study findings, 401(k) plans offer participants a wide variety of investment options; plan fees trended downward between 2009 and 2018; and target date fund use has risen over time.

“The data show 401(k) plans are working—as designed—to provide employers with flexibility to customize them to suit the needs of their unique workforces,” Brooks Herman, executive director of data and research at BrightScope, an Institutional Shareholder Services Inc. business, said. “Building and offering 401(k) plans with a wide array of features and a full range of investment options encourages employee participation and helps them reach their financial goals.”