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Hewitt: 401(k) Participation Rate Falls 2.8%

By Staff Writer

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NU Online News Service, June 17, 2003, 9:35 p.m. EDT – Participation in 401(k) plans seems to be falling, according to Hewitt Associates L.L.C., Lincolnshire, Ill.

Researchers at the benefits consulting firm compared the behavior of 330,000 employees who were eligible to join 401(k) plans in 2001 and 2002. The 401(k) participation rate for those employees fell to 68.2% in 2002, from 71%, and the decline was greater for younger and newer employees, Hewitt says.

Twenty-seven percent of the plan participants had balances of less than $5,000, and the average plan balance fell 2.5% in 2002, to $49,000.

Hewitt retirement planning experts say participants let the stock market make their portfolios more conservative.

Fewer than 17% of the participants made any trades in 2002, and the percentage who made trades in 2001 was only slightly higher. But because the average value of stocks has fallen so much since 2000, the average participant ended 2002 with only 66% of plan assets in stocks and stock funds, down from 74% in 2000, Hewitt says.