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Over the last 10 years, employers have made changes to their retirement plan designs, according to a 2022 research study by Vanguard Group.

Immediate Eligibility

According to a new research paper by Vanguard, rather than making new hires wait anywhere from 30 to 90 days or longer, in 2021, 72% of employers permitted immediate eligibility for deferrals into their companies’ group retirement plans. (Eighty-six percent of plans allow workers to begin contributing within 90 days of hire.)

The sample size for the Vanguard Group study included 5 million participants in 1,700 retirement plans over 10 years.

Since the pandemic, workers have been changing jobs more frequently, so experts at Vanguard say immediate eligibility should become the standard for most companies. In a tight labor market, with lots of competition from other employers, this could help a company stand out and increase the success of their HR departments’ recruiting efforts.

It makes sense that when comparing job offers, an employee would choose the job where they don’t have to wait to start contributing to their 401(k) or similar retirement plan.

Matching Contributions

Along with making participants immediately eligible, companies are also benchmarking their matching plan against what other employers are offering. In 2021, of the 95% of companies that offered some type of matching, 85% included a matching contribution, 46% included a nonmatching contribution and 36% offered both.

Participants deferred an average of 7.3% of their income in 2021, so employer contributions are necessary to help them reach optimal total saving rates. In fact, according to the study, employer contributions make up about 40% of total retirement savings.

The average employer match in 2021 was 4.4% of pay, and the average nonmatching value was 5.1%. Employer contributions can vary greatly across companies and industries, however. While employer contributions averaged in the 4% to 5% range, 18% of plans had an employer match of 6% or higher, and 15% of plans had a match of less than 3%.

If you have any questions about how group retirement plans for business can help attract and retain workers, or to schedule an appointment with Terri Lewis at Prime Capital Investment Advisors, please contact Michaela at 913-491-6226.
Call: (913) 491-6226
033123007 MKS

Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite 150, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”).

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Terri Lewis, CLU®, ChFC®

Partner, Financial Advisor
Prime Capital Investment Advisors
6201 College Boulevard, Suite #150
Overland Park, KS 66211
Call MK: (913) 491-6226