2023
DC Plan Benchmarking Survey

Respondent Profile

Plan Sizes

It’s commonly argued that the size of a retirement plan influences its design. Larger plans, typically with assets exceeding $200 million, capitalize on their scale to implement robust oversight and to secure lower investment fees. These plans are often trailblazers in adopting progressive features such as automatic enrollment, a trend gradually being embraced by smaller plans. While open to new methods, larger plans are apt to adhere to established fiduciary best practices, exemplified by the incorporation of investment committees. This dichotomy underscores the evolving landscape of retirement planning, where size becomes a defining factor in shaping plan structure and in embracing innovative elements for optimal financial management.

Plan Types

While the 401(k) plan stands as the dominant employer-sponsored retirement plan option, 403(b) and 457 plans have much to offer to their respective markets. Tailored to specific employee groups and having distinct regulatory frameworks, these two plan types utilize retiree-centric structures. The plans are more inclined than are 401(k) plans to provide systematic withdrawals post-retirement and immediate eligibility upon hire. Despite these nuances, all three plan types maintain a consistent level of in-person advice and guidance opportunities for participants, helping to ensure a shared commitment to supporting individuals as they move toward retirement.

Contributions

Forty-four percent of defined contribution plans provide employer contributions without necessitating participant deferrals. In contrast with matching contributions, which are exclusive to actively deferring participants, nonelective and profit sharing contributions benefit all employees. The most common contribution approach involves a “pro rata” profit sharing plan, where each participant receives an allocation proportional to a uniform percentage of the person’s compensation. Fifteen percent of plans have adopted the safe harbor contribution, enabling them to offer employees a minimum savings amount without undergoing annual discrimination testing. This diverse landscape of contribution structures reflects the flexibility and strategies utilized by employers in managing DC plans.

Employer Match

Encouraging participant savings in defined contribution plans, employer matches continue to dominate the other contribution options, with 62% of DC plan employers providing them. Notably, eligibility for matches has shifted, as 64% of plans (vs. last year’s 80%) now grant participants match eligibility upon plan contribution eligibility. Immediate vesting is offered by 30% of plans, while 14% enforce vesting periods of five years or more. Additionally, 42% of plans have adopted a graded vesting schedule, allowing matched contributions to vest gradually over a designated time frame, with a maximum duration of six years. Thirty-one percent offer cliff vesting, whereby employees don’t receive the match until the vesting date. As a whole, these responses reflect varied approaches in incentivizing and structuring DC plan participation.

Best and Worst, by Industry

While the survey delves into plan design and administration, it also explores differences by type of business, covering six plan metrics across 48 employer industries. Below, three of those metrics showcase the top and bottom three performers in each of 47 of those industries. Notably, the automobile industry and advertising and marketing grapple with high turnover, driven by fierce competition, demanding working conditions, and dynamic trends—thus, those two industries’ places in two metrics. In contrast, law firms traditionally offer high salaries and a stable environment. This nuanced analysis offers stakeholders insights into industry-specific trends and performance benchmarks.