Match Reinstatement Continues to Grow

Thirty percent of plan sponsors hope to reinstate previously eliminated or reduced matching contributions during 2011, according to a study.

The 7th Annual Retirement Plan Survey by Grant Thornton LLP, Drinker Biddle & Reath LLP, and Plan Sponsor Advisors LLC found 42% of sponsors have no plans to reinstate their match this year. A year ago, 53% of the employers had not decided whether to return to previous contribution levels and 33% had no plans to do so. “This indicates a significant shift in plan sponsors’ outlook on matching contributions since a year ago,” the announcement said.

Eighty-three percent of plan sponsors also reported that either very few or none of their employees had expressed concerns about their retirement readiness.

“Considering the issues facing participants, including reduced employer contributions, decreased plan balances, economic uncertainty and regulatory/administrative updates such as Roth conversions, participants may not be aware that they need to be concerned,” said Jennifer Flodin, Chief Operation Officer of Planned Sponsor Advisors LLC.

The study found plan sponsors are focused more than ever on emerging market (EM) equities, with 77% of plans reporting inclusion or consideration for 2011. This marks a 30% increase since last year when EM was only included or under consideration by 46% of plan sponsors. Real estate investment options were second to EM with 53%, followed by global bonds at 48%.

“The common trait of many of these asset classes is the lack of correlation they share with the equity markets. Asset classes like commodities, real estate, emerging markets and global bonds can be valuable when incorporated into a diverse portfolio, creating a sum greater than the parts,” said Erica O’Malley, Grant Thornton’s national Employee Benefit Plan practice leader, in the news release.

Other survey findings include:

  • Fifty-nine percent of plan sponsors responded that they have conducted one or more tax/legal compliance reviews on their plan in the past three years, an increase from 46% in last year’s survey.
  • Fifty-seven percent of plan sponsors surveyed had frozen their defined benefit plans to new entrants. Of those who froze plans, 58% had also frozen the accrued benefits to existing participants, while 42% continued to accumulate accrued benefits for the current population.
  • After working through the challenges of last year’s new audit requirements for 403(b) plans, over 80% of 403(b) sponsors surveyed believe they have established adequate internal controls over ongoing operations.
  • Fifty-eight percent of plan sponsors stated that they are not considering a Roth feature in their plan, slightly lower than the trend in the marketplace.
The survey sponsors will be conducting a Webcast on Wednesday, March 16, to discuss the complete results of the 7th Annual Retirement Plan Survey. The report can be seen here.