More Employers Than Ever Are Contributing to Workers’ 401(k) Plans

New research from ICI and ISS MI shows the big impact employers have on 401(k) plans

Employers are a key driver of the success of 401(k) plans in preparing American workers for retirement, a new report from ICI and ISS Market Intelligence finds. More than 90% of large plans, generally defined as those with 100 participants or more, offer employer contributions, according to the ICI/ISS MI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2023, and large plans offer 29 investment options, on average.

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“American companies are empowering their workers to save for retirement with employer contributions, diverse investment options, and falling plan fees,” said Shelly Antoniewicz, ICI Chief Economist. “401(k) plans are crucial for private-sector workers’ retirement security, with about 70 million active participants and millions of retirees benefiting.”

Employers Make Significant Contributions to Large 401(k) Plans
Employer and employee contributions to large 401(k) plans, billions of dollars

“The measure of total plan costs has fallen significantly in the decade-plus that we’ve been tracking it using MarketPro Retirement powered by Brightscope. Participants are saving money on plan costs and investment options. This is good news for American retirement savers,” added Brooks Herman, Managing Director, ISS MI.

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Other findings:

• Larger plans are more likely to report an automatic enrollment feature. In 2023, more than half of 401(k) plans in the sample with more than $50 million in plan assets had automatic enrollment, and more than six in 10 plans with more than $1 billion in plan assets did.
  Overall, 43% of large 401(k) plans reported that they automatically enrolled participants.
• Employers made contributions in 91% of large 401(k) plans in 2023, up from 85% in 2007. In addition, 94% of large 401(k) plan participants were in plans with employer contributions, up slightly from 91% in 2007, reflecting the fact that larger 401(k) plans are more likely to have employer contributions.
• Employer contributions represent a significant portion of contributions flowing into large 401(k) plans. In 2023, $181 billion, or 35% of employer and employee contributions into large 401(k) plans, was from employer contributions.
• Since 2009, total plan cost has decreased whether measured on a plan-, participant-, or asset-weighted basis. Among the large 401(k) plans analyzed, total plan cost decreased from 1.02% in 2009 to 0.74% in 2023 on a plan-weighted basis, from 0.65% to 0.48% on a participant-weighted basis, and from 0.47% to 0.30% on an asset-weighted basis.
• All plan size groups saw reductions in total plan cost between 2009 and 2023, but the largest reduction tended to occur for the smallest plans.

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