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More Save More, Sooner in 403(b) Plans

Industry Trends and Research

While not yet back to pre-COVID levels, average deferral rates are up, more participants are contributing, more plans are permitting immediate eligibility, and employer contribution rates to 403(b) plans rose almost 24% year-over-year, according to an annual 403(b) Plan Survey from the Plan Sponsor Council of America (PSCA), part of the American Retirement Association.

Even after weathering the financial impacts of the COVID-19 pandemic, the average employer contribution is now higher than it was three years ago (though not yet at pre-pandemic levels). The survey found the average organization contribution per active participant was $4,887 in 2021—up from $3,943 in the 2020 plan year.

The survey, sponsored by Principal Financial Group, gathered information from more than 300 nonprofit organizations about their 403(b)-plan experience in 2021. It found more eligible employees utilized retirement plans in 2021 (83.4%) than in 2020 (82.6%). An average of 79.4% of eligible employees made contributions to their plans in 2021, an increase from 77.2% in 2020, while employer contribution rates to 403(b) plans rose from 4.6% in 2020 to 5.7% of gross annual pay in 2021. 

Other survey trend highlights:

Savings Soars: The average deferral rate climbed from 6.2% of pay in 2020 to 6.9% in 2021.

Roth Rate Rises (Again, Again): The availability of Roth made another nearly 10-point jump and is now available in 58.8% of plans (up from 49.5% in 2020 and 36.9% in 2018).

“Steady” Eddys: The average number of investment funds offered holds steady at last year’s 10-year low of 23 funds available for participant contributions.

ESG Escalates: The percentage of plans offering an ESG fund increased from 37.7% in 2020 to 42.7% in 2021.

Advice Expands: Advice is now offered by 54.2% of plans, up from 41.6% in 2020.

Education Precedent: More than 30% of organizations state that their primary purpose for providing plan-related education is to increase employees’ overall financial literacy, beating “increasing participation” for the first time.

An emerging focus for nonprofits is financial wellness, according to the survey. The number of organizations providing financial wellness programs to employees increased to 22.1% in 2021—up 37% from 2020. That includes more than half (54.3%) of large organizations with 1,000-plus employees having a comprehensive program. For those that offer a financial wellness program, 83.9% provide information on budgeting, 76.8% provide information on debt management, and 53.6% provide information on student loan debt, helping employees establish positive savings habits beyond plan participation.

“When we look at the results of this year’s survey, we are encouraged by the increased focus among employers on financial literacy for their employees,” said Kevin Morris, vice president and chief marketing officer, Retirement and Income Solutions at Principal. “With our commitment to enabling access to financial security for more people and organizations, we are pleased with this positive progression and increased support.”


The PSCA 403(b) Plan Survey is the only independent 403(b) research report that delivers actionable data on trends among plan sponsors in the nonprofit sector. For more survey results, visit