Small-business defined contribution plans are on a roll, according to a report Vanguard released Thursday.
The number of plans increased from 1,418 in 2013 to 8,873 last year, and the number of participants increased six-fold to 370,414 over that period.
The new report assessed plan design trends and participant savings behaviors in small-business 401(k) plans supported by Vanguard Retirement Plan Access, a service launched in 2011 to provide small-business owners with a 401(k) solution for their employees.
“The dramatic increase in Vanguard small-business plans over the past several years means more Americans are now able to participate in an employer-sponsored retirement savings option and save for a secure future,” Steve Holman, head of service, said in a statement.
Besides increased coverage, Vanguard reported that more small-business plans were adopting plan features that could lead to improved retirement readiness for their employees.
According to the report, nearly two-thirds of all eligible employees participated in their small-business 401(k) plan in 2017, with participation rates varying depending on income and age.
For employees subjected to automatic enrollment, participation rates were higher across all demographic variables: 83%, compared with 58% for plans with voluntary enrollment.
The report said that with both employee and employer contributions taken into account, the average participant contribution rate was 9.7% in 2017, up from 9.3% the year before.
Deferral rates increased with job tenure and age — from 5.2% for employees 25 and younger to 10.6% for those 65 and older.