Summer 2010
Plan Sponsors Ask...
Is there research addressing the effect of educational level on retirement plan participation?
Yes. The Employee Benefit Research Institute (EBRI) research found that workers with lower educational achievement had lower levels of participation in retirement plans. Also, educational attainment was strongly related to pay.
The most highly educated had the highest participation levels in retirement plans, even when taking earnings out of the equation. Differences with less-educated employees were smaller. But those with no high school diploma had significantly lower participation rates than those holding at least a high school diploma.
Less than half (48 percent) of workers without a high school diploma and earning $50,000 or more participated in a retirement plan. By way of contrast, almost 63 percent of those with the same earnings and only a high school diploma, and 76 percent of workers with a graduate degree, participated.
How did plan sponsors cope with the effect of economic conditions on their retirement plans in the last few years? Survey results indicate that, in general, sponsors demonstrated continued commitment to their participants during the downturn of 2008 and 2009. The Profit Sharing/401(k) Council of America (PSCA) found that the majority of plan sponsors maintained their matching or other employer contributions, and a large percentage enhanced their employee education programs.
The Impact of Economic Conditions on 401(k) and Profit Sharing Plans survey revealed that 77 percent of companies made no changes in their matching contributions and 74 percent did not change their non-matching contribution. Plans took a number of actions to help plan participants. About 55 percent increased their education efforts. Almost 20 percent changed the investment menu, 10 percent added investment advice as an option and 10 percent delayed scheduled plan design changes.
Other employer actions included adding automatic enrollment and/or automatic contribution escalation, adding hardship withdrawal provisions to the plan, providing on-site training to cope with market volatility and adding target-date funds as investment choices.
