The latest look at what’s happening with 401k employer matching contributions during the COVID crisis shows that one in 10 plan sponsors have eliminated their matching contributions, according to a new survey from the Secure Retirement Institute (SRI).
Of those with a remaining match, 7% have reduced it, and 19% are considering a reduction.
“Plan design changes—and their implications on plan and employee results—should be informed by consultation with advisors and/or recordkeeper representatives because making these changes have impacts on participant results and plan success measurements and metrics,” said Deb Dupont, associate managing director, SRI Institutional Retirement Research.
The findings align somewhat closely with another recent survey, where Ascensus found 11.8% of employers on its platform (representing more than 116,500 retirement plans covering more than 11 million Americans) stopped or decreased their retirement plan matching contributions as of the end of May.
And an April Willis Towers Watson survey of 816 U.S. companies found 12% have suspended retirement plan matching contributions, with another 23% either planning to or considering suspending their match this year.
In mid-May through early June of 2020, SRI surveyed DC plan sponsors about the impact the pandemic has had on their own companies, their benefits programs and their DC plans.
The SRI report found the crisis has had at least some impact for the majority (54%): most commonly, employers are operating at reduced capacity and smaller companies (measured by number of employees) are more likely than larger employers to be closed, at least for the time being.
Many plan sponsors are considering changes to staffing and/or compensation, most commonly to staffing practices or levels. Changes in either staffing or compensation—or both—will almost certainly affect retirement plan metrics such as participation and contribution rates.
More than a quarter of companies (26%) are putting off decisions about retirement benefits, at least in the near-term, because of the outbreak. Larger companies are more likely to report that they are holding tight on benefits decisions.
“At the moment, few plan sponsors are thinking about making a recordkeeper change in the wake of the crisis, suggesting that providers can continue to reinforce their value in the near term,” Dupont said.
In response to the pandemic crisis, more plan sponsors say they are communicating more frequently with employees rather than evaluating investments or adding advice options in the short term. Only half of sponsors are reevaluating plan investments, reinforcing the value from a fiduciary standpoint.
SRI’s research found sponsors are generally satisfied with the service they are receiving—particularly in this new environment—from recordkeepers (68%) and advisors (66%). In addition, more than 75% say they are satisfied with the communications they and their employees receive from recordkeepers.
A good way for recordkeepers to distinguish themselves from the competition, SRI says, is to strengthen their communications efforts, emphasizing virtual, long-distance capabilities. As plan sponsors look ahead, they realize they will need greater virtual engagement and enrollment support from their recordkeepers.
SEE ALSO:
- 10 Big 401k Plans Suspending Matching Contributions in 2020
- Employer 401k Contributions Keep Up in COVID Crisis
- 4 COVID-Related Retirement Planning Trends
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
