Data & Research November 30, 2010

Employer Match Powerful Deferral Incentive

The Principal Financial Group found that the design of the employer match can be a powerful motivator for participants, even when the employer’s total contribution doesn’t change.
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The Principal analyzed 6,560 contracts involving its plans that include a match formula.  In each of three scenarios studied with the same match, the participant contribution increases as the matching formula targets higher contributions. 

“The data tells us that while the employer contribution stays at 2%, the higher target deferral in the match formula is spurring participants to save more,” said Barrie Christman, vice president of individual investor services at The Principal,in a news release. “This is significant because it shows that employers can incent better savings behavior without having to increase their costs.”

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In addition, the analysis shows that stretching the matching contribution to a higher level does not negatively impact participation rates.

Further analysis of a sample group of participants making a contribution and having an employer match shows that 43% of those participants fall within the 6% -10% contribution range, and 26% are contributing 11%-15%.  Of that sample group, 75% are deferring up to their employers’ matching contribution.                                         

Match Formula 

Maximum Employer Contribution 

 Average Participant Contribution 

Total Contribution

100% up to 2% of pay 

2%

 5.3%

7.3%

50% up to 4% of pay 

2%

 5.6%

7.6%

25% up to 8% of pay 

2%

 7.0%

8.8%

Compliance November 29, 2010

TPA Sentenced for False Statement on Form 5500

The U.S. Department of Labor’s Employee Benefits Security Administration announced that the owner of Philadelphia Pension Planning Corp. has been sentenced for making a false statement in a Form 5500 annual report.
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Charleen Ryan was sentenced to 15 months in prison and three years of supervised release for making a false statement in the Bustleton Landscaping Co. Inc. Profit Sharing Plan Form 5500 annual report.  She was also ordered to pay $715,228.79 to the plan, according to the announcement. Ryan pleaded guilty to making a false statement, admitting that she prepared, executed and authorized the Form 5500 for the plan for plan year 2003.    

Ryan falsely stated in the Form 5500 that the plan held $797,373 in assets at the beginning of plan year 2003 when the plan held significantly less than that amount due to losses that Ryan knowingly concealed.  

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“This third-party administrator jeopardized the retirement security of these workers and their families,” said Assistant Secretary for EBSA Phyllis C. Borzi, in the announcement.  “We will aggressively investigate violations against plans, including efforts to conceal information about the theft of plan assets.”

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