Benefits and Compensation

T. Rowe Price Reports 401(K) Plan Loan Usage Drops To 9-Year Low

The use of 401(k) plan loans in 2018 fell to a 9-year low of 22.5% of participants and continued a steady 6-year decline of nearly 10 percentage points, investment management firm T. Rowe Price said on May 1, drawing on data gathered from nearly 2 million participants for its annual benchmarking report.

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The report also found that the percentage of participants who took a hardship withdrawal was lower for the ninth consecutive year, declining from 1.9% in 2010 to 1.3% in 2018. But, in contrast, both loan balances and the average amount of hardship withdrawals increased.

Overall Findings

Other key findings about T. Rowe Price 401(k) plan usage in the report included:

  • Overall defined contribution plan participation declined slightly. The participation rate dropped by nearly 2% from 2017 to 2018. Plans that did not have auto-enrollment experienced participation drop at more than twice the rate of those with auto-enrollment.
  • Auto-enrollment continued to significantly affect participant behavior. Participation was more than 40 percentage points higher in plans with auto-enrollment than those without it.
  • Pretax deferral rates continued to rise in the T. Rowe Price review. The average pretax deferral rate increased slightly, to 8.6%, reaching a record high for the second year in a row.
  • Employer match increased. Plans offering a 4% employer match surpassed those offering a 3% match for the first time. The lowering of the corporate tax rate due to federal tax reform may have contributed to the increase, the firm said.
  • Plan adoption and participant usage of target-date funds (TDFs) reached an all-time high. Plan adoption in the T. Rowe Price universe reached a peak of 95%. Participant usage also increased in 2018 across all age groups but was highest among younger workers. Additionally, the percentage of participants with their entire account balance in a TDF has grown by 20 percentage points since 2014.
  • 401(k) Roth contributions increased. The number of participants making after-tax Roth contributions increased by nearly 10% compared with 2017; however, overall usage remains low at 7.6%. Millennials aged 30–39 are using the Roth option the most, at nearly 10%, with younger workers aged 20–29 following at 8.8%. In 2018, nearly 75% of plans offered the Roth option.

“Changing employee behavior requires simple solutions and engaging them in a way that motivates them to act. We’ve seen firsthand the positive impact that approachable and easy-to-use resources have on employee behavior,” Kevin Collins, head of Retirement Plan Services at T. Rowe Price, said in a press release about the 2018 findings.


The data in the recently released 2018 study is based on the large-market recordkeeping universe of T. Rowe Price Retirement Plan Services’ 401(k) and 457 plans, consisting of 657 plans and more than 1.8 million participants. It was measured from January 1, 2007, through December 31, 2018.

  1. Rowe Price Group had $1.08 trillion in assets under management as of March 31. It provides mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans, and financial intermediaries.