A Rebuilding Year for DC Plans?

November 15, 2010 (PLANSPONSOR.com) - 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 in the 2010 PLANSPONSOR Defined Contribution Survey. 


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 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.  And 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 discernable 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- and large-size 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. 

On the other hand, the pace of contribution acceleration slowed in 2010.  The overall pace slipped from a 15.5% adoption rate in 2009 to just one in 10 plans this year, though most of that decline came from the smallest plans.  However, even the adoption rate at the largest plans was effectively flat from a year ago.  The median rate of increase was 1.0%, as it was a year ago. 

Large programs were significantly more likely to embrace immediate enrollment; more than eight in 10 mega programs provide for that, compared with a mere 17.5% of micro plans and just 30% of small programs.  Nearly half (49%) of micro plans say their employees are eligible to participate after six months, though just 2.7% of mega plans and only 5.2% of large plans make them wait so long.  Those same trends were also in evidence a year ago. 

Coming tomorrow:  Investment Options, Menus, and IPS