The economy may be recovering, but most employers that have scaled back or eliminated the company match remain undecided whether they will reinstate their retirement plan contributions to previous levels this year. One-third say they don't plan on it, according to the 6th annual Retirement Plan Survey, conducted by Grant Thornton LLP, Drinker Biddle & Reath LLP and Plan Sponsor Advisors.
By now a quarter (26 percent) of employers have either scaled back their contributions or eliminated the company match altogether in an effort to reduce costs, according to the survey, and 53 percent are unsure whether they'll return to previous levels.
Plan participants have changed their contribution patterns as well, in response to the recession. Thirty-three percent of plans sponsors say participants decreased their contributions, while 56 percent say they have seen increases in loan requests and 34 percent of plans have had increased hardship withdrawals.
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However, only 7 percent of plan sponsors reported large increases in loan requests, and just 3 percent of plan sponsors reported significant increases in hardship withdrawals.
"The recent economic challenges have certainly affected the funding — including employer and employee dollars — of defined contribution plans. While most are taking a wait-and-see approach in 2010 with respect to employer contributions, the fact that one fourth of employers have taken significant measures to adjust contribution plans is quite telling of the times," said Debbie Smith, an Employee Benefits practice partner with Grant Thornton LLP.
Dave Wolfe, partner in the Employee Benefits and Executive Compensation practice at Drinker Biddle & Reath says even with the changes in contributions it seems that the majority are "staying the course and leaving their retirement accounts alone."
Get more: April is Financial Literacy Month, but it isn't only important to financial educators. For plan providers, it's an opportunity to promote retirement savings education to participants. Many employees aren't sure where to begin or exactly what they should be planning for. You can provide some essential retirement planning guidance to help employees save more and become more educated.
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