Contributions to 401(k)s at Principal Shoot Up

Participants seem willing to stay the course

Despite the chaos in the financial markets and the large losses sustained in retirement account balances, 19.2% of participants in plans with services provided by Des Moines, Iowa-based Principal Financial Group actually increased contributions to 401(k) plan accounts in 2008, which is a greater number than the 16.5% combined total of those who stopped contributing or decreased their contributions.

Great news and quite encouraging given the context, says Barrie Christman, VP of individual investor services at The Principal. "We spent a lot of time working with plan participants to maintain a long term focus, and it is encouraging to see this."

The findings appear in a report entitled "The Total View 2009," which Principal recently released and which is based on 2007 and 2008 data. The big question, Christman says, is whether participants will continue to put money into their retirement plans in 2009, given the recessionary environment, job losses, and pay cuts. But everything seems to point to people willing to "stay the course," she says, and this is a result of the continued education and guidance that Principal has provided to plan participants to help them make informed decisions.

Indeed, where personalized, one-on-one guidance at the worksite was offered, The Total View report noted that plan participation and savings rates were even greater than where there was no guidance. Christman says that Principal also received a lot of calls from people wanting to know which way to go--again testament to their wanting to make the right decisions for the long-term.

The report also includes early 2009 data that indicates participants and plan sponsors are making changes to their offerings. As of June 1, 2009, 4.9% of employers with Principal plans had made a change to their matching contribution formula since the beginning of 2009, compared to 4.7% for all of 2008.

While this is certainly a function of the economic recession, "things are much less negative than people believe," Christman says. "We are hearing that a substantial percentage of employers are looking to reinstate their offerings as they were before. Many people think that the majority of plan sponsors have stopped matching altogether, but this is not true. The actual cents on the dollar match nationally for Principal Plans actually went up."

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