After a year confronting a volatile market and a weak economy, plan sponsors are focused on repositioning defined-contribution plans to avoid future pitfalls.
According to a recent Callan survey, 19 percent of plan sponsors either reduced or eliminated their company’s matching contribution in 2009. But in 2010 only about 8 percent plan to take that action. Over the next 12 months, 58 percent of sponsors that either reduced or eliminated the match plan to reinstate it.
“As the economy recovers, plan sponsors are using the opportunity to bring back their company match,” says Lori Lucas, defined-contribution practice leader at Callan. “They understand that the matching contribution not only attracts participants to the company’s 401(k) plan, but it makes the plan competitive and appealing to potential employees.”
Callan’s survey found in 2009, DC plan sponsors kept a sharp eye on monitoring and evaluating fund performance, increased their communications to calm participants’ fears about the market decline and reviewed plan-related expenses saying the latter was the most important fiduciary action they took over the past 12 months. In 2010, however, strategic initiatives which include reviewing investment structure and plan design will rise in importance.