401(k) Plan Sponsors Restoring Contributions While Focusing Heavily on the Investments

PSCA’s just-released survey, 401(k) and Profit Sharing Plan Response to Current Conditions, shows that companies are restoring plan contributions that were suspended or reduced since the beginning of 2008; in fact, many companies are increasing and adding new contributions to the plan.  While companies are in the process of restoring contributions, they are increasingly focused on plan investments. 

Companies are continuing the trend we reported a year ago of restoring company contributions.  Half of plans that suspended their matching contribution in the last four years have fully restored it.  Of all plans reported, 66.7 percent have maintained their matching contribution, 12.1 percent of plans increased their match or added a matching contribution, 7.3 percent have fully restored suspended or reduced matches, and 13.9 percent still have suspended or reduced matching contributions.

While the trend of restoring and adding contributions continues, companies are focused on plan investments during this tumultuous economic period. 63.8 percent of plans changed their investment lineup in the last year, and 56.2 percent changed their investments in 2010.  Only 19.7 percent did so in 2009.

This is dramatic. I have not seen anything like this in 25 years of working with plan sponsors. That so many plans sponsors are reviewing and reworking their investment lineups demonstrates the importance they see in delivering the very best investment opportunity as part of the 401(k) plan benefit for their employees, especially in these unusual times. The survey itself does not identify the actual changes but form PSCA’s 54th Annual Survey we know that 21.3% of plan sponsors added or deleted an asset class in 2010 and the move to add target date funds to plan investment lineups continues.

Companies also continue to help their employees understand their plans and investments – more than half of plans increased employee education efforts in 2011, and 43 percent provided education specifically on market volatility.

Other key findings include:

• Of the 14 percent of plans that suspended the match in the last four years, half have fully restored it.
• Of the 11 percent of plans that suspended the non-matching contribution, 40 percent have fully restored it.
• Almost 40 percent of plans reported an increase in plan participation, up from just 3.9 percent in 2009.
• Eight percent of plans reported that they added an automatic enrollment feature to their plan in the last year.
• Nearly one-quarter of plans monitor whether participants are on track for retirement, including more than 40 percent of large plans.

The survey was conducted in October 2011 and reflects the responses from 523 401(k) and profit sharing plan sponsors from across the country. For more information, view the full survey report.