Most Sponsors Maintained Contributions during Downturn

PSCA said it found that more plan sponsors suspended or reduced non-matching company contributions than matching contributions and more large companies (companies with more than 5,000 participants) than small companies suspended contributions. Of companies that suspended matching contributions, almost half (46.7%) have restored the match or plan to restore it within the first quarter of 2010, with more large companies (52.7%) doing so, according to a press release. 

Among survey respondents, 4.7% of companies increased their matching contributions during the downturn.

The survey also revealed a clear correlation between availability of matching company contributions and participation rates, as 72.9% of companies that suspended their match experienced a decrease in plan participation versus only 14.4% of those companies that maintained matching contributions. However, more companies that did not change their match experienced an increase in plan participation (17.9%).

A significant portion of companies that experienced an increase in participation, as well as those that maintained participation levels, stated that it was a result of automatic enrollment. The data indicates that more new hires who were automatically enrolled did not opt out during the tumultuous economic time compared to before.

PSCA said that its recent survey of defined contribution plan sponsors found that overwhelmingly, sponsors stepped up to help their participants during the 2008-2009 economic downturn. More than half of respondents (54.3%) indicated they increased their employee education efforts.

In addition, sponsors evaluated the specific needs of their employees and customized their support to meet those needs. PSCA found that plan sponsors took a variety of steps tailored toward their employee populations including evaluating adding loans, allowing in-service distributions, allowing hardship withdrawals, changing the vesting schedule, decreasing the waiting period for plan eligibility, and adding automatic enrollment.

The Impact of Economic Conditions on 401(k) and Profit Sharing Plans reports on the 2008-2009 experience of 508 plan sponsors. The results are available at www.psca.org.