401(k) Plans Bent but Not Broken

CU360
September 17, 2009 | COMMENTS

Many 401(k) plan sponsors have reduced or eliminated their matching contributions. Combined with the uncertainty of what economic recovery will eventually mean to participants, both employers and employees are taking a wait-and-see approach to their 401(k) plans, according to Deloitte Consulting's annual 401(k) Benchmarking Survey of more than 600 employers.

Among the survey findings, reported on CUNA's CU360 online research portal:

• Seventeen percent of plan providers indicated an uptick in deferral rate changes, hardship withdrawals, loans, and other similar activities.
• Over one-third (38%) reported their employees decreased their deferral rates for 2009, with 60% holding steady at their current contribution levels.
• Twelve percent of employers reported an upswing in opt-outs from auto-enrollment programs.
• Almost one-fifth (19%, up from 17% last year) of plan sponsors believe “very few” of their employees will be financially prepared for retirement.
• More than three-quarters (79%) of employers surveyed are still fairly confident that their plans are effective for recruiting talent, and 68% say they help with retention.

Last year's survey noted a sharp drop in confidence by workers regarding their future ability to afford retirement. With retirement savings plans losing an estimated $2 trillion last year, Deloitte notes that this confidence has fallen even further. For example, a recent survey showed that many respondents plan to put retirement plans on hold and remain in the workforce longer.

On the upside, worries about affording retirement seem to be driving positive personal behaviors. Many employees plan to take more personal responsibility for finances, including increasing their contributions to private savings plans.

For most 401(k) plan sponsors, plan designs have remained relatively consistent from last year. Auto-enrollment and easy enrollment continue to gain popularity among the employers surveyed, as these features help to boost participation rates and contribution levels.

The survey was conducted jointly by Deloitte Consulting, the International Foundation of Employee Benefit Plans, and the International Society of Certified Employee Benefit Specialists.