401(k) Plans Back to Pre-Crisis Levels (and Improved)

New data show that the percentage of companies offering a 401(k) match is back at pre-recession levels. Meanwhile, features like advice and auto enrollment are way up. Now, if we can just get workers to pay attention.

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Mark Weiss / Corbis

The percentage of companies providing a 401(k) match is back at pre-recession levels—and nearing the peak level of a few years earlier, according to data from Schwab Retirement Plan Services. Meanwhile, in key ways these important plans are better than ever.

Plans offering a 401(k) match peaked at 76% of all employers in 2006 before dipping to 67% in the wake of the worst of the financial crisis in 2009, according to Schwab. Last year, the figure improved a third consecutive year to 73%–about where it stood when the meltdown began.

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But we’re not just back to normal; the plans have evolved in encouraging ways:

  • 83% of employers now make 401(k) advice available to plan participants. That figure has risen each of the past six years and is now double where it stood in 2005.
  • 42% of employers automatically enroll employees in their 401(k) plan. That figure has jumped every year since the recession and is up dramatically from just 5% in 2005. At large companies, a more impressive 58% use automatic enrollment.
  • Among employers using automatic enrollment, 40% also incorporate automatic savings increases. This is another trend that has been in place for half a decade. The figure stood at just 14% in 2006.

If there’s a troublesome sign in the Schwab data, it’s that the average matching level remains down from before the financial crisis. In 2007, the average company match was 4.19% of compensation; today it is 3.95% of compensation. Those are just averages. The most common company match is 50 cents on the dollar up to 6% of pay. Another trouble spot: About 30% of plan participants do not contribute enough to get the full company match, reports benefits consultant Aon Hewitt.

The new Schwab data are largely in sync with the findings of a Towers Watson survey released late last year. That analysis of 260 companies that had reduced or stopped their 401(k) matching contributions at the start of the recession found that 75% had since restored the benefit. Most restored the match to pre-recession levels. But one in four reinstated at half the pre-recession level.

In an economy that remains anything but robust, companies evidently continue to feel a little stingy. Yet they are compensating in part by growing participation through features like auto enrollment and auto increases in employee contributions. Such features turn inertia into a retirement savings asset. Employees are free to opt out on both fronts but seldom do.

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The advice component is another critical development. An earlier Schwab survey found that workers who get 401(k) advice save more, are better diversified and less likely to sell stocks when they are down. Still, relatively few plan participants take advantage of advice, which is most commonly online services or one-to-one phone counseling. Schwab estimates that just 10% use such a service, which is free. Other surveys have put the number as high as 25%.

It’s great that companies are restoring and improving their plans. Now if we can just get workers to use them.

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