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Tuesday, February 9, 2010
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Fidelity: Matching contributions key to 401(k) participation
Workers’ participation in 401(k) plans is largely driven by their companies’ matching contributions, so if employers stop contributing, retirement accounts will suffer, according to an analysis released today by Fidelity Investments.
Fidelity’s research showed that a company match of 50% on every dollar of participants’ contributions, up to 6% of pay, can drive up plan participation by as much as 9 percentage points. “Many employers, both small and large, are facing tough decisions about employee benefits in this economic environment,” Scott B. David, president of Boston-based Fidelity’s Workplace Investing unit, said in a statement. “We know that when companies eliminate the match to their workplace savings plans, almost half see a decrease in participation and deferral rates.” Mr. David said that even smaller matching contributions from employers still trigger an increase from employees’ own contributions.
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