PLANSPONSOR - August - September 2022 - 4
INDUSTRY ANALYSIS
To the Limit?
T
he elective deferral limit is the maximum
contribution that may be
made on a pre-tax basis to a 401(k)
or 403(b) plan, per Internal Revenue Code
Section 402(g)(1).
Elective deferrals include both
pre-tax salary reduction contributions and
designated Roth contributions, which are
deferred on an after-tax basis. As published
by the IRS, this year the limit is $20,500.
Those older than 50 may make an additional
catch-up contribution of $6,500, for
a total of $27,000. But how difficult is it to
put away the maximum savings?
The annual mean salary for U.S.
workers is $58,260 as of May 2021, says
data from the Bureau of Labor Statistics.
For someone earning this amount, deferring
the maximum the IRS limit allows
would be 38% of the person's salary.
According to the Bank of America's
" 2022 Financial Life Benefits Impact
Report, " fewer than one in 10 participants
contribute at the allowable 402(g) limit,
with men saving 4% more than women
do. Just 4% of Millennials reach the limit
vs. 14% of Baby Boomers, who are often
helped by higher salaries and the ability
to make catch-up contributions.
In fact, the 2021 PLANSPONSOR
Defined Contribution Survey indicates
that the average deferral in plans of all
sizes is 7.3% with a median deferral rate
of 7.0%.
The Bank of America report indicates
that many employees neglect to
take full advantage of the benefits of
tax-free deferral and growth, with 61%
of all eligible employees, including 70%
of Millennials, contributing less than
$5,000 per year.
This highlights an area where plan
sponsors should plan to focus their educational
content and employee communications.
At the same time, considering the
mean salary of U.S. workers, saving to the
limit may be unrealistic for most.
-Judy Faust Hartnett
4 PLANSPONSOR.COM August - September 2022
Few Employees Contribute to the Max
Many workers fail to fully capitalize on the benefits of tax-free deferral
and growth.
BY GENDER
Female
Male
BY GENERATION
Millennials
Generation X
Employees who defer to the IRS limit
7%
11%
4%
12%
Baby Boomers 14%
Source: Bank of America, " 2022 Financial Life Benefits®
Impact Report " ; data reflects
the behavior of participants enrolled in BofA's proprietary employee benefits programs
Overall Plan
Deferral Rate
7.3%
Average
Overall Plan Participant
Account Balance
$116,572
Average
7.0%
Median
$88,858
Median
Source: 2021 PLANSPONSOR Defined Contribution Survey
http://www.PLANSPONSOR.COM
PLANSPONSOR - August - September 2022
Table of Contents for the Digital Edition of PLANSPONSOR - August - September 2022
INSIGHTS
INDUSTRY ANALYSIS
RULES AND REGULATIONS
UPFRONT
Key Player
Ever Vigilant
Open Season
Simplify the Experience
Connecting One-on-One
The Cost of Protection
FIDUCIARY FORUM
INSIDE ANGLE
PLAN PROFILE
PLANSPONSOR - August - September 2022 - Cover1
PLANSPONSOR - August - September 2022 - Cover2
PLANSPONSOR - August - September 2022 - 1
PLANSPONSOR - August - September 2022 - INSIGHTS
PLANSPONSOR - August - September 2022 - 3
PLANSPONSOR - August - September 2022 - INDUSTRY ANALYSIS
PLANSPONSOR - August - September 2022 - 5
PLANSPONSOR - August - September 2022 - RULES AND REGULATIONS
PLANSPONSOR - August - September 2022 - 7
PLANSPONSOR - August - September 2022 - 8
PLANSPONSOR - August - September 2022 - 9
PLANSPONSOR - August - September 2022 - UPFRONT
PLANSPONSOR - August - September 2022 - 11
PLANSPONSOR - August - September 2022 - 12
PLANSPONSOR - August - September 2022 - 13
PLANSPONSOR - August - September 2022 - 14
PLANSPONSOR - August - September 2022 - 15
PLANSPONSOR - August - September 2022 - Key Player
PLANSPONSOR - August - September 2022 - 17
PLANSPONSOR - August - September 2022 - 18
PLANSPONSOR - August - September 2022 - 19
PLANSPONSOR - August - September 2022 - 20
PLANSPONSOR - August - September 2022 - 21
PLANSPONSOR - August - September 2022 - Ever Vigilant
PLANSPONSOR - August - September 2022 - 23
PLANSPONSOR - August - September 2022 - 24
PLANSPONSOR - August - September 2022 - 25
PLANSPONSOR - August - September 2022 - 26
PLANSPONSOR - August - September 2022 - 27
PLANSPONSOR - August - September 2022 - 28
PLANSPONSOR - August - September 2022 - 29
PLANSPONSOR - August - September 2022 - Open Season
PLANSPONSOR - August - September 2022 - 31
PLANSPONSOR - August - September 2022 - Simplify the Experience
PLANSPONSOR - August - September 2022 - 33
PLANSPONSOR - August - September 2022 - Connecting One-on-One
PLANSPONSOR - August - September 2022 - 35
PLANSPONSOR - August - September 2022 - The Cost of Protection
PLANSPONSOR - August - September 2022 - 37
PLANSPONSOR - August - September 2022 - FIDUCIARY FORUM
PLANSPONSOR - August - September 2022 - INSIDE ANGLE
PLANSPONSOR - August - September 2022 - PLAN PROFILE
PLANSPONSOR - August - September 2022 - Cover3
PLANSPONSOR - August - September 2022 - Cover4
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