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11% of employers suspend 401(k) plan match: Survey

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More than one in 10 employers have suspended their matching contributions to their 401(k) plans, and more are considering doing the same, according to a survey released Wednesday.

The Watson Wyatt Worldwide survey found that 11% of employers have suspended their 401(k) matching contributions and 17% are considering doing the same, as employers try to find new ways to conserve cash due to the economic crunch.

The suspensions for nearly all the companies are likely to be temporary, however. “Clients tell us that they plan to restore the match within a year,” said Robyn Credico, Watson Wyatt's national director of defined contribution plan consulting in Arlington, Va.

The survey found that 47% of employers now use automatic enrollment for their defined contribution plans. Automatic enrollment is geared toward employees who don't decide whether to participate in their company's defined contribution plan.

Under automatic enrollment, employees are enrolled unless they actively opt out. Once enrolled, few employees later opt out. “It is a way of boosting participation and employee savings,” Ms. Credico said.

Of employers with automatic enrollment, 23% apply the feature to all employees, while 77% apply it to all new employees.

While automatic enrollment has grown rapidly in recent years, it is unlikely to become a universal feature in defined contribution plans, Ms. Credico said. That is because employers that match employees' contributions will see their costs rise as more employees participate in the plans.

The survey was conducted from mid-March to mid-April. Results are based on the responses of 149 companies, each with more than 1,000 employees.

A summary of the survey, “Managing Defined Contribution Plans in the Current Environment,” is available at www.watsonwyatt.com.