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Three Out of Five Employers Maintain 401(k) Match Despite Economic Crisis

March 18, 2009 — A new survey of employers released by WorldatWork and the American Benefits Council, “Trends in 401(k) Plans,” and presented yesterday at a National Press Club Newsmaker press conference in Washington, D.C., found that the financial crisis has not significantly discouraged 401(k) contributions or participation. Seventy-four percent of employers reported no change in the employer matching contribution; 15% have either increased or are considering increasing the employer match; 8% have either decreased or are considering decreasing the 401(k) match and 3% reported eliminating the match.

According to the survey, more than nine out of ten U.S. companies offer an employee 401(k) plan. In addition, despite the widely reported drop in account balances, two-thirds (66%) of organizations indicated that at least 70% of eligible employees participated in those 401(k) plans in 2008.

“These statistics reflect that employers are clearly committed to providing retirement savings opportunities to their workers, even in tough economic times,” said Cara Welch, public policy director for WorldatWork. “401(k) plans serve a wide range of employers and a wide range of employees. Additional reform should encourage and build on this commitment and avoid creating new obstacles to plan sponsorship."

Nevertheless, the impact of the shrinking economy and the reality of financial stress felt by Americans can be seen in some employee behavior. Nearly half (49%) of companies surveyed report that employees are increasingly taking loans from their retirement accounts. “The real importance of these findings is that the 401(k) plan system is an integral part of our retirement system in this country,” said Lynn Dudley, senior vice president, policy, for the American Benefits Council. “Our study shows it remains both strong and popular.”

Other key findings

• In 2008, 94% of companies provided some type of employer match to the employee’s individual 401(k) contribution, compared to 93% when the survey was first conducted in 2002.
• The most common employer matching contribution is 3% to 4% of a participant's pay; the most common employee contribution is 5% to 7% per paycheck. 
• Forty-four percent of participating organizations offer automatic enrollment in 401(k) plans; 56% do not. President Obama's FY 2010 budget included proposals for mandatory automatic payroll-deduction into workplace plans or individual retirement accounts.

Survey methodology
This survey was conducted in December 2008 by WorldatWork, in collaboration with the American Benefits Council. Surveys were sent electronically to a random representative sample of 4,938 U.S. WorldatWork members. A total of 505 members participated in this survey during a two-week period, generating a 10% response rate.

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