Despite the unstable economy, employers remain committedto 401(k) plans, according to a study released by WorldatWork, a global human resources association along with the American Benefits Institute.
While there have been stories of companies suspending or eliminating their 401(k) match to reduce costs over the recession, 88 percent of employers say they still offered matching contributions during the previous five years.
“The survey results show that employers and employees are utilizing 401(k) plans and value these plans as an integral piece of retirement planning,” says said Cara Woodson Welch, WorldatWork vice president of policy and public affairs. “Employers continued investment in 401(k) plans seen though sustained contribution levels, enhanced plan choices and increased usage of automatic enrollment features is further evidence that employers view 401(k) plans as a fundamental part of an employee’s total rewards package.
"Policy makers should take note of the high utilization of these plans and restrain from mandating or regulating changes to the administration of 401(k)s that would jeopardize employees’ participation in these plans.”
Seventy-seven percent of respondents report that they have not altered their 401(k) matching formulas in the last year and are not considering future changes. Among respondents providing investment advice services to employees in 2012, 67 percent say they relied on independent advisers, up from 47 percent in 2008.
Another 73 percent of respondents say at least 70 percent of their eligible employees are enrolled in employer-sponsored 401(k) plans, and when looking at 2008, fewer employees are taking hardship distributions and loans from their 401(k) plans.
“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,” says Lynn Dudley, senior vice president of retirement and international benefits policy for American Benefits Council. “This study makes clear that too many workers are ‘leaving money on the table’ by failing to maximize their employer’s match.
"Employers continue to believe in the 401(k) system. If lawmakers avoid destabilizing tax changes, enhance automatic contribution programs and expand participant education through electronic delivery, 401(k) plans will continue to serve retirees of all income levels.”