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Most Companies to Restore 401(k) Match in 2010; Other Steps
High priorities: matching contributions, automated features and investment tools

By Stephen Miller  2/17/2010

Many U.S. employers plan to step up their efforts during 2010 to help workers maximize their 401(k) savings, according to a survey by consultancy Hewitt Associates. High on employers' priority lists in 2010: restoring company 401(k) matches that were suspended or reduced during the market downfall and adding automated tools and investment features that take much of the guesswork out of saving and investing.

Hewitt's Hot Topics in Retirement 2010 survey, conducted in November/December 2009, looked at 162 mid-size and large U.S. companies representing 5.7 million employees. Among the findings:

Fewer employers (54 percent) are confident about their workers' ability to retire with sufficient assets than in 2009 (66 percent).

Less than one in five (18 percent) say they are very confident about their employees' ability to have enough retirement income to last throughout their retirement years.

To help employees meet their financial goals in retirement, 80 percent of companies that suspended or reduced their company 401(k) match in 2009 are planning to restore it in 2010. In addition, the survey found a continuing emphasis on automating 401(k) plans to help workers maximize the benefits of their retirement plans:

Almost half (46 percent) of employers that do not already offer automatic rebalancing—a tool that helps employees regularly balance their portfolios with their target allocations—are very or somewhat likely to add it to their plan in 2010.

Nearly four in 10 (38 percent) are very or somewhat likely to add automatic contribution escalation—where employees can elect to have their contribution rates increased automatically over time.

An increasing number of employers are offering investment services and tools to help employees make better investment and savings decisions. Half (51 percent) currently offer online investment guidance, and 42 percent are very or somewhat likely to do so in 2010 (see Helping 401(k) Participants Pays Off).

Twenty-eight percent of employers offer managed accounts, which allow workers to delegate the overall management of their accounts to an outside professional. One-quarter of companies indicate that they are very or somewhat likely to offer managed accounts in the coming year.

"In the last 18 months, employees' 401(k) accounts took a serious financial hit due to the severe market downturn. Some of them also lost the additional retirement savings that their 401(k) employer match provided," says Pamela Hess, Hewitt's director of retirement research. "While there has been marked growth in 401(k) balances since the market recovery began, we still see too many workers not saving and investing in a way that will help them achieve their retirement goals. Employers are trying to do their part to help—which is why they are restoring their matching contributions and offering features and tools that push workers to save more throughout their working years." 

Likely Actions in 2010 to Manage Risk in Defined Contribution Plans

 

Very
Likely

Somewhat
Likely

Somewhat
Unlikely

Very
Unlikely

Review plan governance (including retirement committee structure, fiduciary ownership, processes and procedures)

27%

33%

26%

14%

Benchmark plan administration and procedures to best practices

18%

33%

33%

16%

Increase the amount of participant communication surrounding the investments and overall plan and fund fees

16%

52%

25%

8%

Perform a compliance review (including third-party reviews)

14%

24%

36%

25%

Increase the frequency and/or intensity of the review of total plan costs

9%

34%

38%

19%

Increase the frequency and/or intensity of fund option monitoring

2%

19%

58%

22%

Perform more-robust projections of employer contributions and the impact of behavior changes

0%

24%

44%

33%

Source: Hewitt Associates

Other Key Findings

Among other survey findings:

59 percent of employers offer automatic enrollment in 2010, up from 51 percent in 2009. Among those that do not currently offer the feature, more than one-quarter (27 percent) are very or somewhat likely to add it in the coming year.

Employers are taking considerable action to mitigate risk in their 401(k) plans. Nearly seven in 10 (68 percent) are very or somewhat likely to increase the amount of employee communication surrounding the investment fees and overall fund fees in their 401(k) plans in the coming year. Six in 10 (60 percent) are very or somewhat likely to review their plan's governance structure, and more than half (51 percent) are very or somewhat likely to benchmark plan administration and procedures to best practices in 2010. In addition, 38 percent plan to conduct a compliance review.

Companies are taking a similar risk management approach for their defined benefit pension plans. Of the survey respondents that offer defined benefit plans, 80 percent are very or somewhat likely to review funding strategy and 73 percent are very or somewhat likely to assess how their current strategies are approaching pension plan risks. Almost two-thirds (64 percent) plan to adjust equity exposure and/or overall asset allocation, while slightly more than half (52 percent) are very or somewhat likely to adjust their plan investments to align with their plan's liabilities.

The number of employers offering target-date funds in 2010 (78 percent) remained consistent with the number in 2009 (77 percent).

Also consistent with 2009 numbers, nearly one-third (29 percent) of companies in 2010 offer a Roth 401(k) to their employees. Twenty-five percent said they are very or somewhat likely to add one this year. Among the employers that are unlikely to add a Roth 401(k) account to their plan, 54 percent said that it must be clear that employees would use the feature before they add it.

14 percent of employers offer annuities outside their plan as a rollover option, up from 8 percent in 2009. More than one-quarter (28 percent) are very or somewhat likely to add them in 2010.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Helping 401(k) Participants Pays Off, SHRM Online Benefits Discipline, February 2010

Auto Enrollment in 401(k) Plans Led to Higher Match Rates, Study Finds, SHRM Online Benefits Discipline, February 2010 

DOL Seeks Comments on Lifetime Income for Retirement Plans, SHRM Online Benefits Discipline, February 2010

Defined Benefit Plans Outperformed 401(k) Plans During Bull and Bear Markets, SHRM Online Benefits Discipline, February 2010

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