How America Saves 2021 Small Business Edition

Gain valuable insight into the behaviors of small-business DC plan sponsors and their participants.

Read the reportfor How America Saves 2021: Small Business Edition

The pursuit of financial well-being

The year that brought us a global pandemic—and all the health care, social, political, and economic challenges tethered to it—tested the resilience of retirement plans and the trust participants placed in them.

Against this background, advisors, plan sponsors, and participants were all keenly sensitive to the historic predicament they were facing. How America Saves 2021 Small Business Edition addresses their responses.

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For some, financial well-being was a daunting prospect in 2020. Yet, for our VRPA participants, we're pleased to have witnessed an alternative experience, as noted by their steadfast faith in the design of their retirement plans and choice to forgo emotional trading in the face of an unstable market.

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Steve Holman, Principal
Vanguard Retirement Plan Access (VRPA)

Brief insights from the 2021 report

Target-date funds rule

At year-end 2020, nearly all VRPA participants were in plans offering target-date funds. Eight in ten participants had all or part of their account invested in target-date funds.

Such investments continue to be the increasingly popular choice among small-business retirement plans. In fact, in 2020, more than half of all contribution dollars were directed to target-date funds.

Charting the growth in popularity of target-date funds

Autoenrollment becomes more appealing

As of December 31, 2020, 16% of VRPA plans permitting employee-elective deferrals had adopted automatic enrollment. This represents 37% of VRPA plan participants. (Typically, larger plans adopt autoenrollment more frequently than smaller plans.)

Autoenrollment can mitigate the impact of demographics, as those who are younger, shorter- tenured, and in a lower-income bracket exhibit a much higher participation rate when autoenrollment is available.

VRPA adopters of autoenrollment



More plans come with a safe harbor

Sixty-nine percent of VRPA plans with an employer contribution had adopted a safe harbor employer contribution design as of year-end 2020. The most common design was one with a value of 4%—up to the first 5%—of employee contributions (representing 39% of safe harbor plans).

A safe harbor 401(k) plan allows a plan sponsor to automatically pass certain annual tests to ensure compliance with IRS regulations—if specific contribution, vesting, and participant notification requirements are met.*

* If an employer makes contributions, either matching, nonelective, or discretionary, that exceed certain limits/requirements, the employer is required to treat them as non-safe harbor contributions and subject the plan to ACP and top-heavy testing. After-tax employee contributions also subject the plan to these tests.

Review the full report for more insights

We invite you to use our research to help you find better ways to optimize outcomes for retirement plan participants as they pursue financial well-being.

Read the How America Saves full report

Also of interest

All investing is subject to risk, including possible loss of principal. Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target date funds is not guaranteed at any time, including on or after the target date.