Data Shows Increase in 401(k) Plan Participation

Most U.S. employers continue to match contributions

By Stephen Miller Nov 9, 2009

The number of U.S. workers participating in 401(k) plans increased even as the stock market declined and the economy weakened. In addition, most 401(k) plan participants continued to receive matching contributions from their employer, according to new data from financial firm Charles Schwab, an administrator of employee retirement plan accounts.

Overall, 401(k) plan participation increased four percentage points through the end of 2008—the middle of the financial crisis—to 77 percent. Participation stood at 73 percent at the end of 2007, according to data from retirement plans serviced by Schwab.

The participation rate jumped even higher, to 84 percent from 77 percent, among plans that offer automatic enrollment programs. However, whether or not automatic enrollment was offered, participation rates generally increased across the board, particularly among small and mid-size companies.

“The good news is that most employees are sticking with their 401(k) plan, which continues to be one of the best vehicles to save for retirement,” says Catherine Golladay, vice president of 401(k) participant education and advice at Charles Schwab. “The even better news is that people are also contributing to their accounts at almost the same level as they were prior to the market downturn. In fact, the average contribution rate in our plans stayed around 7 percent from 2007 to 2008, which is a reflection of people getting more serious about saving.”


Participation Rate


Participation Rate

Plans with automatic enrollment



Plans without automatic enrollment






Most Employers Still Offer Matching Contributions

Despite enormous pressure on many companies to cut costs, relatively few eliminated their 401(k) match among Schwab 401(k) plan clients. As of July 31, 2009, less than one in 10 employers stopped making matching contributions, according to Schwab data. Sponsors in some of the industries most impacted by economic conditions, including manufacturing and retail, were more likely to suspend their match. Comparatively, no companies in the health care or wholesale industries suspended their match, according to the Schwab plan data. Overall, nearly 7 in 10 U.S. employers are currently offering a 401(k) match.

“Our plan sponsor clients tell us that the employer match is one of the most important 401(k) plan features for employees, and eliminating it is a last resort even in difficult economic times,” says Robyn Alcorta, vice president of 401(k) client services for Charles Schwab. “Matching employee 401(k) contributions is important in keeping the 401(k) benefit competitive and driving high participation and savings rates, and employers tell us that these factors lead to a more productive and loyal workforce.”

Most Avoid Hardship and 401(k) Loans

While the economic crisis of 2008 was serious, most participants in Schwab-serviced 401(k) plans resisted temptation to tap retirement savings. The number of people taking loans from their 401(k) plan actually decreased in 2008 to 5.67 percent from 5.91 percent in 2007. The number of people taking hardship loans increased, but only slightly, to 0.91 percent in 2008 compared to 0.8 percent in 2007.

Stephen Miller is an online editor/manager for SHRM.

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