5 Ways Employers Plan to Change Their 401(k) Plan

Many companies have cut their 401(k) match, but others are exploring more creative ways to reduce 401(k) expenses


Employers are tweaking 401(k) plans to save money. Most finance and human resources executives say that their company’s 401(k) plan needs slight modifications (56 percent) or a number of improvements (32 percent), according to a new survey. Only 9 percent of the HR employees surveyed think their 401(k) plan needs no changes, the online survey of 219 executives at companies with revenue over $100 million by CFO Research Services and Charles Schwab Corporation found. The survey went on to ask the executives what changes the company has made to the 401(k) plan since September 2008 or plans to make in the near future. The responses:

Reduce automatic enrollment. Automatic enrollment gets more people enrolled in the company’s 401(k) plan and saving for retirement, because workers must opt-out if they don’t wish to participate, rather than deliberately sign up and make choices. However, automatic enrollment means more participants for the company to manage and spending more 401(k) matching dollars on employees. Thus, about 26 percent of the executives surveyed have plans to limit automatic enrollment to targeted employees, such as those with two years of service, as opposed to all employees.

More hand holding. Many of the executives reported an increase in employee requests for 401(k) advice since September 2008 (57 percent) and more interest in financial education (39 percent). And 87 percent of the human resources workers say it’s important for the company to provide employees with access to 401(k) investment advice. A quarter of the companies surveyed have plans to replace existing education campaigns, educational brochures, and group meetings with more individualized 401(k) advice for employees.

Going matchless. The toughest change for employees to cope with is an elimination or a reduction of their 401(k) match. About 23 percent of the executives said their company has already or plans to completely eliminate the employer matching contribution to plan. Another 15 percent of the respondents reported plans to decrease their 401(k) match, if they haven’t already. Yet, 96 percent of the executives also said it was important for the company to match at least some percentage of employee contributions.

More online services. Employers also plan to put 401(k) services on autopilot to cut costs. Some 19 percent of companies plan to increase their use of automated services for participants, such as eStatements.

Lower fees. A few of the executives expressed concern about 401(k) fees and expenses for companies. About 4 percent of the respondents plan to or recently began offering funds with lower operating expenses, such as index funds.

Tell us, what 401(k) changes would you like to see your employer make?