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Fewer employees took hardship distributions and loans from their 401(k) plans in 2012, reports a study of plan activity at American companies
Fewer U.S. employees took hardship distributions and loans from their 401(k) plans in 2012 compared with 2008—a sign of economic improvement—according to a study by WorldatWork, an association of total rewards professionals, and the American Benefits Institute, the research and education affiliate of the American Benefits Council, which represents major U.S. employers.
The 2013 Trends in 401(k) Plans and Retirement Rewardssurvey of 476 American Benefits Council and WorldatWork member companies was conducted from Nov. 14 through Dec. 17, 2012, and provides a snapshot of defined contribution plan activity at mostly large American companies.
Among the findings, the study revealed that fewer employees are taking hardship distributions and loans—referred to as "leakage"—from their 401(k) plans. From 2008 to 2012:
“Employers continued their investment in 401(k) plans though sustained contribution levels, enhanced plan choices and increased use of automatic enrollment features," said Cara Woodson Welch, WorldatWork vice president of policy and public affairs, in a media briefing conference call. For instance, the surveyed findings revealed that:
Respondents were asked if their company offered automatic 401(k) enrollment, either with or without an automatic escalation clause. The survey revealed that:
Yes, auto enrollment without auto escalation
Yes, auto enrollment with auto escalation
No auto enrollment/auto escalation and not considering
No auto enrollment/auto escalation, but considering
Source: 2013 Trends in 401(k) Plans and Retirement Rewards.
For more than three-quarters (77 percent) of surveyed companies, there had been no change in the 401(k) matching formula during the previous 12 months, nor were they currently considering a change in the near future.
However, only 9 percent of companies reported that 90 percent or more of their employees took full advantage of the company's matching contributions, while 57 percent of companies reported that more than half but less than 90 percent took full advantage of matching contributions. At 34 percent of companies, half or less of employees took full advantage of matching contribution.
“Too many workers are still ‘leaving money on the table’ by failing to maximize their employer’s match," said Lynn Dudley, American Benefits Council senior vice president, retirement and international benefits policy. “Because 401(k) plans have become such a vital component of employees’ financial security, it is essential that we strengthen the system by building on those successes.”
Stephen Miller, CEBS, is an online editor/manager for SHRM.
SHRM Online Benefits Page
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