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More Companies Plan to Restore 401(k) Match
Plus, a look at how 401(k) fees are paid

By Stephen Miller  12/22/2010
 

More U.S. companies that suspended or reduced contributions to 401(k) and profit sharing plans because of economic conditions are restoring or planning to restore them, according to the Profit Sharing/401k Council of America (PSCA) 2010 401(k) and Profit Sharing Plan Response to Current Conditions.

"Companies continue to make their 401(k) plans a top priority," said David Wray, PSCA president. "Those that have suspended their matches are in the process of restoring them, and companies are aggressively restructuring their investment lineups."

The survey found that:

More than 70 percent of companies made no changes to matching contributions, and nearly 10 percent increased them over the period from 2008 through 2010.

Of the 14.8 percent of companies that suspended matching contributions over this period, 39.3 percent had restored them and 37.8 percent were planning to restore them by mid-2011.

Employee Contributions Up

Employees are continuing to contribute to their plans, with many increasing their contributions:

While nearly 40 percent of companies reported no change to the number of employees making contributions, 31.6 percent indicated an increase.

78.1 percent of companies that suspended matching contributions (which remain suspended) reported a decrease in participation.

More Employer Involvement

In 2010, companies were engaged in managing their plans. They increased employee education, added investment advice and monitored plan investments more closely. For example:

94 percent of companies have a committee responsible for reviewing fund performance.

More than half of plans changed their investment lineup in 2010, replacing poorly performing funds and increasingly scrutinized plan fees (72.2 percent of companies in 2010 vs. 55.4 percent in 2009).

The survey was conducted in October 2010 and reflects the responses from 401(k) and profit sharing plan sponsors across the U.S.

How 401(k) Fees Are Allotted

Separately, Deloitte Consulting and the International Foundation for Employee Benefit Plans' Annual 401(k) Survey, released in December 2010, provides snapshots of a number of plan features.

Among the findings about 401(k) fees, the survey of U.S. plan sponsors (evenly distributed by geography, size, and ownership status) found that:

• 86 percent viewed the fees that they paid to administer their 401(k) plans as competitive. However, 21 percent still indicated they had difficulty in obtaining the basis for such fees.

• 36 percent were not confident about understanding revenue sharing arrangements between fund managers and plan administrators. 

How are your 401(k) plan's recordkeeping and administrative fees paid?

 

2009

2010

All of the recordkeeping and administrative fees are paid through investment revenue (e.g., fund expense ratios).

43%

43%

In addition to fees deducted from investment revenue, there is a direct fee charged by the recordkeeper.

46%

39%

In addition to fees deducted from investment revenue, there are additional fees in the form of a wrap fee or added basis.

6%

13%

Other fee arrangement.

5%

5%

Source: Deloitte Consulting and the International Foundation for Employee Benefit Plans, Annual 401(k) Survey.

When a direct fee is charged by the recordkeeper, the survey indicated that, in 2010, 66 percent of companies paid the fee on behalf of plan participants while 23 percent passed the fee along to participants and, for 12 percent, the fee was paid by the company and participants (percentages are rounded).

For those companies that passed some or all of the direct fee on to participants, 56 percent charged an equal dollar amount to all participants while 44 percent charged pro-rata based on account balances.

An overwhelming majority (90 percent) of plan sponsors indicated their satisfaction with the greater fee transparency that is imminent under a Department of Labor rule that takes effect in July 2011 (see the SHRM Online article "DOL Issues Interim Final Rule on Disclosing Retirement Plan Fees"). However, only 73 percent indicated that they are receiving detailed breakouts of indirect and direct revenue received by their recordkeeper.

Stephen Miller is an online editor/manager for SHRM.

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