A Schwab news release said participation rates in its 401(k) plans jumped from 73% at the end of 2007 to 77% a year later with the stepped-up rates seen in all plans – particularly at small- and mid-sized employers. Auto-enrolled plans went from 77% to 84% by year-end 2008.
class=”default”> “The good news is that most employees are sticking with their 401(k) plan, which continues to be one of the best vehicles to save for retirement,” said Catherine Golladay, vice president of 401(k) participant education and advice at Charles Schwab, in the news release. “The even better news is that people are also contributing to their accounts at almost the same level as they were prior to the market downturn. In fact, the average contribution rate in our plans stayed around 7% from 2007 to 2008 which is a reflection of people getting more serious about saving.”
class=”default”> According to Schwab, relatively few sponsors eliminated their 401(k) match among Schwab 401(k) plan clients. As of July 31, 2009, 9% stopped making matching contributions.
class=”default”> Sponsors in industries that were hardest-hit by the economic downturn, including manufacturing and retail, were more likely to suspend their match. Comparatively, no companies in the health care or wholesale industries suspended their match, according to the Schwab plan data. Overall, 69% employers are currently offering a 401(k) match.
“Our plan sponsor clients tell us that the employer match is one of the most important 401(k) plan features for employees and eliminating it is a last resort even in difficult economic times,” said Robyn Alcorta, vice president of 401(k) client services for Charles Schwab, in the announcement. “Matching employee 401(k) contributions is important in keeping the 401(k) benefit competitive and driving high participation and savings rates, and employers tell us that these factors lead to a more productive and loyal workforce.”
Finally, Schwab said the number of people taking loans from their 401(k) plan decreased in 2008 to 5.67% from 5.91% in 2007. The number of people taking hardship loans increased slightly, to 0.91% in 2008 compared to 0.8% in 2007, according to Schwab.
|# of Plans||2007 Participation Rate||2008 Participation Rate|
|plans with auto enrollment||158||77%||84%|
|plans without auto enrollment||377||71%||74%|