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Plan sponsors report more generous matching formulas

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The number of plan sponsors not matching employee contributions to their retirement plans has significantly decreased over the past five years, according to new research.

Strategic Insight, an Asset International Company, discloses this finding in a summary of survey results obtained through its affiliate PLANSPONSOR magazine during the years 2009 through 2013. Plan design features that saw aggregate improvements include employer matching contributions, formulas, schedules and vesting.

In 2009, 26 percent of plan sponsors said they did not offer a match. By 2013, only 10 percent of plan sponsors did not offer a match, reflecting a decrease by nearly two-thirds, the survey reveals.

“Increasing percentages of employers offering matching contributions illustrate plan sponsor support in providing retirement security,” says Bridget Bearden, Strategic Insight’s head of defined contribution retirement research.

The survey fielded in 2012 found that 68 percent of employers offering a match made no change to their contribution during the previous five-year period. However, 13 percent of plans sponsors changed the matching formula, resulting in a higher contribution rate. Only 4 percent of plan sponsors said they had yet to reinstate a suspended or reduced match in 2012.

Plan sponsors reported more generous matching formulas in 2013 compared to prior years. In 2013, one in five plan sponsors indicated they matched “100 percent or more of participants’ first 6 percent of salary.” Employers matching “50 percent to 99 percent of the first 6 percent” increased to 58 percent in 2013 from 52 percent in 2009. As plan sponsors gradually improved their match formula, the occurrence of less attractive matching formulas has declined.

In 2009, 31 percent of plan sponsors indicated their match was “less than 50 percent of the first 6 percent.” By 2013, the incidence of a “less than 50 percent match” declined to 22 percent.

More than 80 percent of plan sponsors match contributions within three months. The most common match frequency in 2013 was ‘each pay period’, which 77 percent of plan sponsors reported. The percentage of plan sponsors that match annually declined from 15 percent in 2012 to 14 percent in 2013.

Bearden notes that “better matching formulas and schedules reflect a commitment to helping participants accumulate savings in a timely and efficient manner. While these factors are critical for creating a strong defined contribution plan, employers must also be prepared to take more direct steps to educate and encourage their employees to become better savers.”


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