Despite challenging economic times and heavy criticism of the defined contribution system, companies and participants remained committed to their retirement plans in 2008 and 2009.
According to the new "Impact of Economic Conditions on 401(k) and Profit Sharing Plans" survey from the Profit Sharing/401k Council of America, more than three-fourths of plan sponsors continued their matching company contributions (76.8%) and almost three-fourths continued their non-matching company contributions (73.2%). The majority of participants continued to participate in their employer's plan and maintained deferral levels.
More plan sponsors suspended or reduced nonmatching company contributions than matching contributions and more large companies (companies with more than 5,000 participants) than small companies suspended contributions. Of companies that suspended matching contributions, almost half (46.7%) have restored the match or plan to restore it within the first quarter of 2010, with more large companies (52.7%) doing so.
The data also revealed a correlation between availability of matching company contributions and participation rates. Nearly 73% of companies that suspended their match experienced a decrease in plan participation versus only 14.4% of those companies that maintained matching contributions.
Though some plan sponsors were forced to suspend company contributions in the wake of economic pressures and less revenue, most were not. Nearly 5% of companies increased their matching contributions. Additionally, although some companies experienced a decrease in plan participation, more companies that did not change their match experienced an increase in plan participation (17.9%).