America Saves week is February 26th- March 2nd. Saving automatically is at the heart America Saves Week’s mission. It’s proven to be that the easiest and most effective way to save is automatically.
Automatic savings can venture beyond simply having money directly deposited into a saving account. One of the more popular forms of automatic savings offered by employers is defined contribution plans, with 71.0% of employees being enrolled in one. Defined contribution plans include Profit Sharing, Money Purchase, 401(k), 403(b), 457(b), 457(f), and ESOP (see definitions below).
Based on our Benefits USA report that features data from nearly 3,400 company benefit plans nationwide, in organizations offering defined contribution plans only 26.7% of Not-For-Profit organizations offer a 401(k) with employer contributions. 94.7% of Banking & Finance organizations offer employer contributions in the 401(k), the highest of the industries. It is worth noting that 45.3% of Not-For-Profit organizations offer a 403(b) with employer contribution, rather than a 401(k). 403(b) plans are more commonly offered by Not-For-Profit organizations.
How does your industry compare? Download our retirement plan snapshot.
It is important to track these trends and practices, especially as new regulations are enacted. With the new tax plan now in effect, there have been a number of news stories of organizations implementing company-wide bonuses as a reaction to the new legislation. While we don’t necessarily foresee these large company-wide bonuses to continue, we do expect that organizations will invest more funds to total reward programs, such as 401(k) contributions.
Terms and Definitions:
- 401(k) Plan: A retirement savings account in which employees contribute on a pre-tax basis. The employer often contributes to the account as well. Employer contributions may be a flat percentage of employee pay, but are usually related to the employee’s contribution. The employer’s contribution is usually, but not always, in the form of a match on employee contributions.
- 403(b) (Tax Sheltered Savings) Plan: Similar to 401(k) plans, but are available only to certain not-for-profit organizations. Employees and/or employers can contribute to this plan. Employer contributions may be a flat percentage of employee pay, but are usually related to the employee’s contribution.
- 457(b) (Tax Sheltered Savings) Plan: This plan is similar to the 401(k) plan, but is available only to public employees. Employees and/or employers can contribute to this plan. Employer contributions may be a flat percentage of employee pay, but are usually related to the employee’s contribution.
- 457(f) Plan: This plan is a non-qualified deferred compensation arrangement (a nonqualified retirement plan) that provides certain tax-exempt employers with an opportunity to supplement the retirement income of executives. Within such an arrangement, all the contributions become vested at an agreed upon time in the future (typically at retirement). Participants can contribute to the plan on a pre-tax basis.
- Employee Stock Ownership Plan (ESOP): A plan that enables qualified employees to receive stock accrued as plan participants at no cost to themselves upon retirement or separation from the organization.
Download these as a PDF here: Terms and Definitions