Data on Retirement Contributions to Defined Contribution (DC) Plans

INSIGHTi
Data on Retirement Contributions to Defined
Contribution (DC) Plans
August 12, 2021
Individuals can save for retirement in two types of tax-advantaged accounts: defined contribution (DC)
and individual retirement accounts (IRAs). DC plans are employer-sponsored retirement plans in which
contributions from a worker, the employer, or both are placed in an individual account. Individuals with
wage income can also contribute to IRAs, which are privately held retirement savings accounts.
Contributions—and any investment earnings—in DC accounts and IRAs can be used as a source of
income in retirement. Both DC accounts and IRAs may accept rollovers. Rollovers—transfers of funds
from one retirement account to another—preserve the tax advantages of retirement savings. This Insight
provides Internal Revenue Service (IRS) data on contributions to DC accounts in 2018. Congress has an
interest in contribution data because (1) the tax expenditures for retirement plans (estimated to be $153.6
bil ion for DC plans and $23.8 bil ion for IRAs in FY2020) are one of the largest categories of revenue
losses attributable to provisions in the tax code, and (2) recent legislation has included provisions that
would modify contribution limits for certain individuals. An August 12, 2021, CRS Insight provides
similar data for IRAs.
Employers sponsor a variety of DC plans, such as 401(k) plans (for private-sector employers), 403(b)
plans (for public education systems and nonprofit employers), 457(b) plans (for state and local
government employers and nonprofits), the Thrift Savings Plan (for the federal government), Savings
Incentive Match Plan for Employees (SIMPLE, for businesses with 100 or fewer employees), and Salary
Reduction Simplified Employee Pension (established prior to 1997 for businesses with 25 or fewer
employees). In March 2020, 60% of U.S. workers had access to DC plans through their employers.
The tax benefits of DC accounts depend on whether the account is a traditional or a Roth account.
Contributions to traditional DC accounts are excluded from taxable income in the year in which the
contributions are made (i.e., they are made with pre-tax funds); investment earnings accumulate on a tax-
deferred basis. Withdrawals from traditional accounts are included in taxable income when received.
Contributions to designated Roth accounts within a DC plan are not excluded from taxable income in the
year in which they are made (i.e., they are made with after-tax funds). Investment earnings accumulate on
a tax-free basis: Qualified distributions from Roth accounts (those taken by an individual who has held
the account for five years and made after death, on account of disability, or on or after attainment of age
59½) are not included in taxable income.
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CRS INSIGHT
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Individuals’ contributions to DC accounts (referred to as elective deferrals) are subject to annual
contribution limits. Except for SIMPLE plans, in 2018 (the most recent year for which contribution data
from the IRS is available), individuals could contribute up to the lesser of (1) their wage income for the
year or (2) $18,500 to their DC accounts. Individuals age 50 and older could make an additional $6,000 in
catch-up contributions to their DC accounts. In 2018, the contribution limit for SIMPLE plans was
$12,500; individuals age 50 and older could make an additional $3,000 in catch-up contributions. The
contribution limits and catch-up contribution limits are adjusted annual y for inflation.
Elective Deferrals to DC Plans in 2018
Table 1 lists elective deferrals by contributing taxpayers by age groups in 2018. About 60 mil ion
taxpayers contributed to DC plans, corresponding to 41.7% of al taxpayers with wage income. In
addition:
 the average contribution to DC plans was $5,510;
 more than 8% of taxpayers who contributed to DC plans in 2018 contributed the
maximum amount;
 the percentage of contributing taxpayers who contributed the maximum amount permitted
increased by age group—2.1% of contributing taxpayers under age 35 contributed the
maximum, compared to 15.9% of contributing taxpayers age 65 and older; and
 about half of taxpayers with wage income age 35-65 made elective deferrals.
Table 1. Elective Deferrals to DC Plans
Tax Year 2018
Percentage of
Taxpayers with
Percentage of
Wage Income
Contributors
Average
Number of
Making DC
Making the
Contribution
Contributing
Plan
Average
Maximum
for Non-Max
Age Group
Taxpayers
Contributions
Contribution
Contribution
Contributors
Al
60,353,306
41.7%
$5,510
8.5%
$4,018
Under 35
17,591,326
32.3%
$3,083
2.1%
$2,745
35 to under 45
13,872,028
48.0%
$5,282
7.2%
$4,225
45 to under 55
13,980,565
50.7%
$6,525
11.2%
$4,698
55 to under 65
12,058,621
49.6%
$7,669
14.5%
$4,964
65 and older
2,850,766
30.4%
$7,476
15.9%
$4,454
Source: CRS analysis of Internal Revenue Service Statistics of Income Data, Form W-2 Study, Tables 1.A, 2.F, and 2.I, July
2021, https://www.irs.gov/pub/irs-soi/18inal w2.xls.
Notes: In 2018 (the latest year for which data is available), there were 144.6 mil ion taxpayers. In 2018, the contribution
limit to DC plans (except for SIMPLE plans) was the lesser of (1) an individual’s wage income or (2) $18,500. Individuals 50
and older could make an additional $6,000 in catch-up contributions. The contribution limit to SIMPLE plans was $12,500,
and individuals 50 and older could make an additional $3,000 in catch-up contributions. Taxpayers whose contributions
equaled 100 percent of their wage income were also designated as making a maximum elective contribution.

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Congressional Research Service
3

Author Information

John J. Topoleski
Elizabeth A. Myers
Specialist in Income Security
Analyst in Income Security





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IN11721 · VERSION 1 · NEW

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