Before-Tax Feature Spurs Participant Contribution Rates

October 15, 2001 ( - Participants contribute 6.8% of their pre-tax dollars to their retirement plans, a new study by the Employee Benefits Research Institute and the Investment Company Institute shows.

The EBRI/ICI 401(k) survey shows also shows that practically all the money contributed by participants in these defined contribution plans is on a pre-tax basis.

In addition, the survey shows that:

Get more!  Sign up for PLANSPONSOR newsletters.

  • the majority, 85%, of participants made only before-tax contributions to their plans
  • 97% of all dollars contributed by employees were contributed on a before-tax basis
  • on average, participants contributed 6.8% of their salaries on a before-tax basis.

Before-tax contribution activity varied with:

  • over 60% of participants contributing more than 5% of their salaries on a before-tax basis
  • 21% contributed more than 10% on a before-tax basis
  • one tenth of participants earning over $40,000 a year contributed at the $10,000 before-tax limit in 1999
  • 13% of participants with salaries between $70,000 and $80,000 contributed at the cap
  • 18% of those with salaries between $80,000 and $90,000 were at the limit.

However, of the participants not contributing at the limit, 52% were prevented from doing so due to a plan-imposed contribution limits below the regulatory limit.

Bigger with Age

Older participants generally contributed a higher percentage of their salaries to plans than their younger colleagues, regardless of differences in salary and job tenure.

Participants tended to increase the share of their salary contributed to their 401(k) plan as their salaries rose until salaries reached $80,000.

For individuals with salaries above $80,000, before-tax contribution rates tended to fall as salaries rose as regulatory limits, and plan contribution limits came into effect.


The option of borrowing from their 401(k) accounts increased participant contribution rates. On average, a participant in a plan offering loans appeared to contribute 0.6% more to the plan than a participant in a plan with no loan provision.

Total contributions – the sum of employee and employer contributions – were higher for participants who received an employer contribution as part of their 401(k) plans than for those who did not.

The average total contribution rate was 10% of salary for employees in plans offering an employer contribution, compared with 7.4% for those in plans not offering an employer contribution.


The EBRI/ICI 401(k) contribution analysis examined the 1999 contribution behavior of 1.7 million 401(k) plan participants drawn from the EBRI/ICI database.