Data & Research March 17, 2009

Three-Fourths of Employers Have Not Touched 401(k) Match

A new survey by two workplace benefits groups found 74% of participating firms haven’t changed their 401(k) match.
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Actually, slightly more employers reported having a match in 2008 (94%) compared to 93% when the survey was first conducted in 2002, according to a news release.

The joint survey by WorldatWork and the American Benefits Council also found that 15% have either increased or are thinking about upping their match; 8% have either decreased or are thinking about decreasing the 401(k) match; and 3% reported eliminating the match.

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“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, in the news release. “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.”

According to the release, the most common match is 3% to 4% of a participant’s pay while the most common employee contribution is 5% to 7% per paycheck.

Some 49% of companies surveyed also report that employees are increasingly taking loans from their retirement accounts.

According to the survey, more than nine out of 10 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.

The survey was conducted in December among 505 WorldatWork members.

Other Studies

Earlier studies mirrored the latest survey’s results. A study released in February found 73% of plan sponsors said they planned to keep their hands off their 401(k) match (see “73% of Sponsors Plan No 2009 Match Changes“).

A poll released in December 2008 found 83% of sponsors did not expect to change their match (see “Most Employers Don’t Plan to Reduce Contributions“).

A PLANSPONSOR Webinar held last week explored the ways sponsors and their advisers could look for other potential cost-cutting areas before changing the match (see “What to Consider Before Cutting the Match“).

Finally, a recent PLANSPONSORNewsDash survey found nearly two-thirds of respondents said they had not changed their match. However, an earlier version of the NewsDash poll taken in November found 16% had made no changes yet; that number dropped to 12.4% for the lastest survey (see “SURVEY SAYS – Changed Your Mind About the Match?“).

Products March 17, 2009

Strategic Insight Checks Out New Retirement Income Solution

Strategic Insight published an in-depth report containing detailed information on standalone living benefits (SALBs) based on proprietary document research and extensive interviews.
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The SALB makes the income guarantees offered on variable annuities (VAs) available on mutual funds and managed accounts. “Guaranteed Retirement Income Beyond Annuities: Standalone Living Benefit, A Novel Product Solution for Mutual Fund and Managed Account Investors” provides insurers, mutual fund companies, managed account providers and broker/dealers with key information for analyzing and understanding this new product, Strategic Insight said in a news release.

The Securities and Exchange Commission (SEC) approved the first SALB in March and four different contracts are on the market today, according to the announcement. The guarantees are similar to guarantee lifetime withdrawal benefits (GLWBs) on VAs, though they are generally simpler, in part because they are intended to be sold through financial advisers. Policyholders retain full control of the assets covered by the guarantee; however, the contract establishes a guaranteed stream of lifetime income if the value of the covered account is depleted through withdrawals or poor market performance.

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“There are tax and other differences between SALBs and VAs,” said Tamiko Toland, principal researcher and author of the report and editor of Annuity Insight, a research and competitive intelligence provider for the VA industry, in the release. “However, the real innovation with these products is the extension of lifetime income guarantees to assets outside of annuities. The availability of additional options means that more investors will have access to predictable and sustainable income in retirement.”

The report includes:

  • design and marketing of currently available products and those awaiting approval
  • regulation and taxation
  • market potential
  • implementation strategies
  • comparison with VAs,
  • risk management and design issues,
  • broker/dealer appetite,
  • context for delivery in the fee-based advisory space.

 

More information is available here.

 

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