Tuesday, December 8, 2009

81.5 Percent of Employers Continue or Raise Level of Matching Contributions to 401(k) Plans

Four out of five employers have maintained or increased their matching and non-matching contributions to their 401(k) plans during the Great Recession of 2008 and 2009, according to the Profit Sharing /401(k) Council of America. And, nearly half of all employers who reduced or suspended their match have either already restored the match or plan to restore it by the end of the next quarter.

By Robert Stowe England
December 8, 2009

The Chicago-based Profit Sharing / 401(k) Council of America surveyed employers who sponsor 401(k) and profit sharing plans in October and found that 76.8 percent made no changes to their matching contributions in 2008 and 2009, compared to the end of 2007.

An additional 4.7 percent of plan sponsors increased the employer match, bringing the share of surveyed companies that either maintained or increased their match to 81.5 percent.

Further, of 264 companies that offered a non-matching company contribution -- where the employer makes a contribution to the plan whether or not an employee makes a contribution -- 73.2 percent made no changes to their plan.

The council's survey of 508 plan sponsors from across the country found overall "a continued commitment by plan sponsors to their participants and by participants to the plan," according to the council's report of the survey.

The report is titled "Impact of Economic Conditions of 401(k) and Profit Sharing Plans." It can can be found at this link:
http://www.psca.org/Portals/0/401k%20Economic%20Impact%20Survey%20Final.pdf

Not surprisingly, the survey also found that when companies suspended the employer's matching contribution, 72.9 percent of plans experienced a decrease in plan participation by employees. That is, fewer employees made contributions to the plan.

What is surprising, however, is that even in the midst of the worst recession since the Great Depression, 17 percent of plans had an increase in employee participation (employees contributions) even though there was no change in the employer match.

On the down side, 14.8 percent of employers suspended the match, while 3.7 percent reduced it. The economic fallout on non-matching contributions was greater, as 26.8 percent of companies surveyed suspended or reduced it.

For employees who work at a company that suspended or reduced the match, there is bit of good news. Within this group, 5.4 percent of companies have already reversed the reductions or suspensions, and another 41.3 percent plan to restore their match within the first quarter of 2010.

That means that during the next quarter nearly 47 percent or nearly half of those companies that had reductions or suspensions in matches will restore them.

Of those companies that have suspended or reduced their non-matching contribution, 5.5 percent have already restored it, and 30.6 percent plan to restore it within the first quarter of 2010.

The council also surveyed the impact of the economy on 403(b) plans and the findings of that survey, which are similar to those for 401(k) plans, can be found at this link:
http://www.psca.org/Portals/0/403(b)%20Economic%20Impact%20Survey_Final%20Draft2.pdf

Copyright (c) 2009 Robert Stowe England. All Rights Reserved.

No comments: