The 401(k) market is standing strong in the face of the economic turmoil, a December 2008 survey from the American Benefits Council and WorldatWork reveals. Nearly three-quarters of employers reported no change in their matching contributions.
That’s the good news. But for companies thinking about reducing or dropping 401(k) matches all together (11%), they should beware of the impression this could send to employees, said ABC’s Lynn Dudley at a recent press conference on the survey’s findings.
“By and large, employers are consistently making this match. The economic downturn hasn’t caused them to drop off their match,” explained Dudley, senior vice president of policy at ABC.
Where that has occurred, the employer is responding to a particularly devastating circumstance within the industry or company, or maybe some challenges stemming from the company’s defined benefit plan, she added.
Dropping the match doesn’t mean employers won’t bring it back eventually. In fact, that’s been the experience she’s seen so far. Still, the survey shows that nearly 50% of employers indicate that workers are increasingly taking loans from their retirement accounts.
“401(k) plans serve a wide range of employers and a wide range of employees. Additional reform should encourage and build on this commitment and avoid creating new obstacles to plan sponsorship,” said Cara Welch, public policy director for WorldatWork.
A total of 505 WorldatWork members participated in the poll during a two-week period.
Other key findings included:
- The most common employer matching contribution is 3% or 4% of a participant's pay; the most common employee contribution is 5% to 7% per paycheck.
- Forty-four percent of participating organizations offer automatic enrollment in 401(k) plans.
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