Benefits April 7, 2003

Less Match, Less Participation?

April 7, 2003 (PLANSPONSOR.com) - The matching company contribution has long been touted as a significant participation incentive, and a recent survey suggests that cutting back on the match does, in fact, have an impact.
Reported by

In an informal survey of the client base of NYLIM (New York Life Investment Management), Retirement Plan Services found that among the eight plans that either suspended or reduced their match since January 1, 2002, the average impact on plan participation was a 9.45% decline.

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NYLIM conducted the survey in March among its client base of roughly 300 midsize companies with 500 or more employees.

Cut Backs

Participation reductions ran anywhere from a 1% reduction to as much as an 18.4% decline, according to NYLIM, which noted that workforce make-up as well as level of communication may also have had an impact on some of these numbers. However, the longer the match has been cut, the greater the impact on participation.

Consequently, the recent announcements by Schwab, Prudential Securities, and Goodyear to either cut or reduce their company match don’t bode well for retirement savings. PLAN SPONSOR’s 2002 Defined Contribution Services Survey of more than 2,800 401(k) plans found that average plan participation rates dipped in every market segment, even with no apparent change in company match. Overall, participation rates hovered just below 75%, a decline of about 2.5 percentage points compared with last year’s survey – and large plans saw their average participation rates drop by nearly six percentage points (see Image Conscious ).

Evidence that the presence of a company match exerts a positive influence was also found in the results of PLAN SPONSOR’s Top 100 Defined Contribution Plans by Participation Rate , where a company match was the most commonly offered plan feature. Nearly all of the top 100 DC plans (94%) provided some kind of company match, with an average participation rate of 91.9% (see Top Plans Buck Trends, Boost Participation ).

Reader Responses April 6, 2003

SURVEY SAYS: The 4th Of July

June 28, 2001 - A week from yesterday, most workers in the US will be celebrating Independence Day with a day off work. But, as expected, the mid-week occurrence of one of the few remaining holidays that doesn't get shuffled around is making for some interesting holiday arrangements.
Reported by

Nearly 82% of our survey respondents are only getting the 4th off, although as one might expect a large number of respondents (and their co-workers) will be taking a few extra days off before and/or after the holiday. A large number would normally have gotten a four-day weekend had the 4th fallen on any day of the week OTHER than Wednesday (better luck next year, as they say). Only 11% were willing to commit to an early start “off” on the third, while 1% were taking both the third AND the fourth off. Just 0.57% were taking the full week off.

Roughly 6% of respondents to our survey were doing “something” else, with a wide variety of alternatives. The most common alternative was a creative use of floating holidays ? and several are in 24/7 businesses that can’t EVER take a day off (see below).

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In the “Why Bother” Category:

“We will close on the 4th only this year. However, the week is dead. Employees are generally just watching the grass grow. Next year when the 4th is on Thursday, we will close the offices and manufacturing operations and require all to take a vacation day or use one of the personal days allotted to them. This may cause a little grumbling but from a productivity point of view it is well worth it.”

“We’ll be closed on the 4th (but I won’t be planning any big meetings for the afternoon of the 3rd).”

“We are officially closed on the 4th and I assume leave early on the 3rd since leaving early on the business day before a holiday has become the American Way. That is as expected as an annual raise. The frustrating thing is that the powers that be never (a) decide on exactly when or (b) notify the group of “(a)” until the last minute. So it is hard to plan for the 3rd. We could just officially have a ½ day on the 3rd, but then we’d want more anyway….never satisfied….the real American Way.”

“Just the 4th (d), but we get to dress casual on Tuesday (Yippee).”

“We may as well shut down the rest of the week after the 4th. Clients and employees alike are out of the office physically, or mentally.”

From the Round the Clock “Club”

“Our company does not close. We consider it a holiday and pay double time to those that work, but we are a farm and chickens have to be feed.”

“We are a hospital. We remain open 24 hours per day / 7 days per week.”

“Our customers will be working and purchasing materials. Since they pay our bills we will be working to support them.”

Alternative Approaches

“Several years ago, we traded the Veterans Day holiday for an extra day attached to the 4th holiday. That was great until this year when the 4th is on Wednesday. Our office is actually going to be open the entire week. Each employee got to take two days off during the week –any two as long as there would be a few people here each day. I took Monday and Friday to have two long weekends –Wednesday is kind of a bonus –even though I’m working, it will be an easy day since everyone else is closed — no phone calls.”

“Our office will close the 4th, 5th, & 6th- we get a 5-day weekend! The 4th & 5th are actual paid holidays and the 6th is a day off but the hours must be made up the following Mon-Thur by working four 10-hour days.”

“For the Fourth of July our company is closing the 4th, 5th and 6th. These were floating holiday dates chosen by employees at he beginning of the year….”

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