Plan sponsors who stopped matching employees’ contributions in their defined contribution plans are starting to reinstate them, according to research from Principal Financial Group. A look at first-quarter data from the financial group shows that plan sponsors and participants
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Plan amendments are low—less than 2% in the first quarter—but much of that activity was to bring back company matches. Forty percent of plan sponsors who have submitted amendments to their plan have done so to reinstate the 401k employer match, Principal found. Furthermore, sponsors were three times as likely to reinstate a match as to remove it.
However, businesses are feeling the recovery differently, and some—notably large, institutional businesses—have been slower to bring back the match. Principal found that 55% of midsized businesses have reinstated their company match, compared to 30% of small businesses and 25% of institutional firms. Midsized businesses were also more likely to submit amendments to remove their 401k employer match in the first quarter: 6.5%, compared to 4.3% of large firms and 1% of smaller businesses.
Related: 10 Big 401k Plans Suspending Matching Contributions in 2020
Participant behavior
Although participants are making fewer calls regarding their retirement plans—volume is down 4%, compared to the first quarter of 2020—they have complex requests, Principal found. Calls about distributions are also up 4%, while calls about withdrawals have fallen 9%.
However, participants who are seeking loans and withdrawals need larger amounts. Loan requests fell 25% in the first quarter, but participants asked for an average 12% more. Meanwhile, a 30% decrease in hardship/disaster withdrawal requests came with a 20% average increase in amount requested.
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Danielle Andrus works as an editor for The Financial Planning Association® (FPA®). Over the past 15 years, she has worked in various capacities, including writing and editing. Andrus has worked for several notable publications and outlets and spent more than seven years as the executive managing editor at ALM Media, publisher of Investment Advisor magazine and ThinkAdvisor.com. Before that, she was online editor for Summit Professional Networks, where she oversaw newsletter development for four magazines, including Benefits Selling, Senior Market Advisor, Boomer Market Advisor, and Bank Advisor.
