In an informal survey of the client base of NYLIM (New York Life Investment Management), Retirement Plan Services found that among the eight plans that either suspended or reduced their match since January 1, 2002, the average impact on plan participation was a 9.45% decline.
NYLIM conducted the survey in March among its client base of roughly 300 midsize companies with 500 or more employees.
Participation reductions ran anywhere from a 1% reduction to as much as an 18.4% decline, according to NYLIM, which noted that workforce make-up as well as level of communication may also have had an impact on some of these numbers. However, the longer the match has been cut, the greater the impact on participation.
Consequently, the recent announcements by Schwab, Prudential Securities, and Goodyear to either cut or reduce their company match don’t bode well for retirement savings. PLAN SPONSOR’s 2002 Defined Contribution Services Survey of more than 2,800 401(k) plans found that average plan participation rates dipped in every market segment, even with no apparent change in company match. Overall, participation rates hovered just below 75%, a decline of about 2.5 percentage points compared with last year’s survey – and large plans saw their average participation rates drop by nearly six percentage points (see Image Conscious ).
Evidence that the presence of a company match exerts a positive influence was also found in the results of PLAN SPONSOR’s Top 100 Defined Contribution Plans by Participation Rate , where a company match was the most commonly offered plan feature. Nearly all of the top 100 DC plans (94%) provided some kind of company match, with an average participation rate of 91.9% (see Top Plans Buck Trends, Boost Participation ).