Economy edges upward, so do 401(k) contributions — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Economy edges upward, so do 401(k) contributions

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As the economy improves—even slightly—employers and employees have begun a slow return to normalcy in how they treat 401(k) retirement benefits. A recent survey by Plansponsor magazine uncovered the following trends in 2010, compared with 2009:

  • Fewer hardship withdrawals: Slightly more than 2% of participants took hardship distributions in 2010, down from 2.7% in 2009.
  • More employer matches: More than three-quarters of employers are contributing to their employees’ 401(k) funds. That’s slightly higher than in 2009—but not enough to offset the 12.3% of employers that stopped making 401(k) contributions during the recession. About half of the largest plans now contribute 51% or more of whatever employees put in, up from 38% that identified that match level a year ago.
  • Higher employee contributions: 24.9% of plan sponsors say all or nearly all of their participants now contribute enough to take full advantage of employer matches. That’s less likely in small companies.
  • But lower participation rates: Employee participation in 401(k) plans was down slightly—71.5% in 2010, compared with 72.3% a year earlier.
  • And fewer automatic enrollments: Fewer employers adopted automatic enrollment programs in 2010. However, there was a discernible uptick in adoption at the largest sponsors (62.7% in 2010 versus 52.3% a year ago).

Nearly two-thirds of 401(k) plans give participants the option of consulting with a financial advisor to help them make investment decisions.

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