RSS icon

Top Stories

What Companies Contribute to 401(k) Plans

Charts of company contributions, broken down by company size and by industry.

October 3, 2003
Recommend (0) Comments (0)
Related Topics: Retirement/Pensions, Compensation
Reprints

Below, you’ll find three charts. The first chart shows company contributions as a percentage of payroll. The second chart shows company contributions by company size. The third chart shows company contributions by industry.

    First, though, some summary thoughts on amounts, formulas, and frequency of contributions.

Amount Contributed
    Profit-sharing plans tend to be the most generous, with company contributions averaging 8.1 percent of pay. Company contributions are lowest in 401(k) plans, averaging 2.5 percent of pay. Company contributions to profit-sharing plans tend to be higher if the company also offers a defined-benefit plan.

Contribution Formulas
    Numerous formulas are utilized to determine company contributions. In plans permitting participant contributions, the most common formula is a fixed match only, present in 29.1 percent of plans (including plans with safe-harbor matches). The most common type of company contribution for profit-sharing plans is a discretionary profit-sharing contribution only, which is present in 70.9 percent of plans.

    Of plans with company matches, 13.6 percent of plans provide different matches to participants based on the percentage of pay deferred (graded match). Also, 2.1 percent of plans provide varying matches based on years of service (seniority-based match).

    For plans with fixed matches, the most common matches are $.50 per $1.00 up to the first 6 percent of pay (26 percent of plans); $.50 per $1.00 up to the first 4 percent of pay (8.0 percent of plans) and $.25 per $1.00 up to the first 6 percent of pay (7.6 percent of plans).

Frequency of Company Contributions
    Matching contributions are most frequently made on a payroll-period basis (56.8 percent of plans), while non-matching contributions are most often made annually. Past PSCA survey data indicates a trend toward providing matches on a payroll-period basis.

Company Contributions as a percentage of eligible participants’ total annual payroll by plan type and plan year

Plan Type 1997 1998 1999 2000 2001
Profit Sharing 8.8% 8.3% 8.6% 8.2% 8.1%
When a Defined Benefit Plan is Also Offered 11.9% 10.3% 10.4% 12.0% 10.9%
When a Defined Benefit Plan is Not Also Offered 8.7% 8.2% 8.5% 7.2% 7.7%

Combination 5.9% 5.5% 5.3% 4.5% 4.6%
When a Defined Benefit Plan is Also Offered 5.4% 4.2% 4.0% 3.6% 3.8%
When a Defined Benefit Plan is Note Also Offered 5.9% 5.7% 5.5% 4.8% 4.7%

401 (k) 3.2% 3.3% 3.3% 2.5% 2.5%
When a Defined Benefit Plan is Also Offered 2.9% 2.8% 2.7% 2.6% 2.5%
When a Defined Benefit Plan is Not Also Offered 3.3% 3.4% 3.5% 2.5% 2.5%

All Plans 5.5% 4.9% 4.7% 4.6% 4.0%
When a Defined Benefit Plan is Also Offered 4.5% 3.7% 3.4% 3.4% 3.5%
When a Defined Benefit Plan is Not Also Offered 5.7% 5.2% 5.0% 5.0% 4.2%
Please note that companies not offering a contribution are excluded from this table.

 

Company contributions as a percentage of eligible participants’ total annual payroll by plan type and plan size, 2001

Plan Size by Number of Participants

Plan Type 1-49 50-199 200-299 1,000-4,999 5,000+
Profit Sharing 8.4% 7.3% 8.9% 6.9% 4.5%
When a Defined Benefit Plan is Also Offered # 6.6% 9.4 12.0% #
When a Defined Benefit Plan is Not Also Offered 8.4% 7.4% 8.9% 5.2% 4.5%

Combination 5.4% 4.8% 4.1% 4.2% 4.0%
When a Defined Benefit Plan is Also Offered # 5.2% 3.2% 3.4% 3.4%
When a Defined Benefit Plan is Not Also Offered 5.4% 4.7% 4.3% 4.6% 4.4%

401 (k) 3.5% 2.3% 2.7% 2.5% 1.9%
When a Defined Benefit Plan is Also Offered 2.9% 2.0% 2.2% 3.0% 2.3%
When a Defined Benefit Plan is Not Also Offered 2.9% 2.0% 2.2% 3.0% 2.3%

All Plans 5.2% 4.2% 4.1% 3.6% 3.0%
When a Defined Benefit Plan is Also Offered 7.7% 4.5% 3.1% 3.3% 2.9%
When a Defined Benefit Plan is Not Also Offered 5.1% 4.1% 4.2% 3.7% 3.0%
Please note that companies not offering a contribution are excluded from this table.
# Indicates no data or significant sample size.

 

Plan Type

Industry Profit Sharing Combination 401 (k) All Plans
Durable Goods manufacturing 8.0% 4.2% 2.5% 4.0%
Non-Durable Goods Manufacturing 7.3% 5.1% 2.6% 4.2%
Wholesale and Retail Trade 6.5% 3.9% 1.7% 3.3%
Financial, Insurance and Real Estate 7.0% 5.2% 2.7% 4.3%
Services 7.7% 4.9% 2.6% 4.1%

PSCA’s 45th Annual Survey of Profit Sharing and 401(k) Plans, reprinted with permission.

Comments

Hr Jobs

Loading
View All Job Listings