Employers bringing back the 401(k) match

By BenefitsPro


By Paula Aven Gladych

Companies have started making contributions to their defined contribution retirement plans again, according to new research by the Plan Sponsor Council of America.

The 55th Annual Survey of Profit Sharing and 401(k) Plans showed improvement in all key confidence indicators in 2011. Companies that provide a matching contribution to their plan increased to 95.5 percent in 2011, up from 91 percent in 2010. Small companies, in particular, are bringing back the match, with 92.8 percent of companies, with fewer than 200 participants, making the match in 2011, compared to 83.3 percent in 2010.

The percentage of eligible employees making contributions to the plan also showed improvement, increasing from 76.9 percent in 2010 to 79.5 percent in 2011.

Contributions also increased last year, with the average company contribution increasing to 4.1 percent of pay, up from 3.7 percent in 2010, and the average participant deferral rate increasing from 6.2 to 6.4 percent of pay.

“The continued upward trend in participation and contribution levels is a result of the ongoing, sustained efforts of plan sponsors to effectively communicate their plan and educate their participants on the benefits of enrolling and staying in the plan,” said Bob Benish, PSCA’s interim president and executive director. “Sponsors are looking beyond just increasing participation rates and are embracing plan design features that will make the plan more attractive to employees, while also making the plan more effective at increasing overall retirement readiness and financial health.”

The survey also found that the number of companies offering target-date funds increased from 61.5 percent to 68.6 percent of plans, Roth after-tax contributions are now permitted in 49 percent of plans, up from 45.5 percent in 2010, and automatic enrollment is used by 45.9 percent of plans, up from 41.8 percent in 2010.

The percentage of plans with automatic enrollment, that had a default deferral rate higher than 3 percent, increased from 25.8 percent of plans in 2010 to 32.2 percent.

The Plan Sponsor Council of America (PSCA), a national, non-profit association of 1,200 companies and their six million employees, advocates increased retirement security through profit sharing, 401(k), and related defined contribution programs to federal policymakers.

Originally published on BenefitsPro.com