|Illustration by Wesley Allsbrook|
In a very real sense, this has been a “rebuilding” year for many plan sponsors and participants: a time spent rebuilding account balances, rebuilding and/or restoring employer match contributions, a time for shoring up participant rates, and—in some cases—restoring trust. The markets, overall, were sympathetic to those causes but, in many respects, the still-soft economic trends doubtless weighed on the kinds of dramatic trend shifts that we have seen in prior years. Meanwhile, plan sponsors remained unsure about several key plan design elements: fees, target-date glide paths, retirement-income offerings, the focus of their investment policy statements, and the “best” option for a qualified default investment alternative (QDIA), to name just a few.
Just a year after a number of high-profile employers chose to suspend and/or eliminate their 401(k) matches, there was evidence of a modest restoration. Matching contributions were offered by more than three-quarters of the plans responding to this year’s survey but, while that was slightly higher than the 73.6% in 2009, it was not enough to offset the 12.3% who, in last year’s survey, indicated that they had recently eliminated the match/employer contribution. That said, while the overall trends were largely unchanged, more than half the “mega” plan respondents (see “Sizing Up the Respondents”) indicated a match equivalent to between 51% and 99% of 6% of salary, compared with 37.9% that identified that match level a year ago, with most of that difference coming from the “50% on 6% of salary” matching category. More than a quarter of responding plans vested participants in that match immediately (43.4% of mega plans), though more than one in five (23.6%) made participants wait five years, consistent with trends in the 2009 survey.
Only a quarter (24.9%) of plan sponsor respondents said that “all or nearly all” of their participants were deferring enough to take full advantage of the employer match, a reading that declines sharply with plan size. Participation rates were roughly flat with a year ago, with responding plans reporting a combined participation rate of 71.5%, compared with 72.3% a year ago. The median participation rate was also lower: 75.0% in 2010, compared with 78% in last year’s survey.
As for automatic enrollment, the 2010 trend line was mixed. While the overall adoption rate was slightly lower this year, there was a discernible uptick in adoption at the largest programs (62.7% in 2010, compared with 52.3% a year ago) and about a 10% increase in the number of mid-size and large programs—but small and micro plans showed no change at all. That said, the primary motivation this year, as it has been the past two, has been to be more proactive in helping workers save. Indeed, 63% of responding employers said that this year, compared with 60% in 2009. A push for more participation was cited by a mere 13.6%, and just one in 10 said that they were inspired by the Pension Protection Act’s clarity on feature adoption.