Employer contributions to worker retirement accounts increase

Workers who contribute to an employer-sponsored retirement account may see an increase in the amount of money they accrue in the coming years as companies are increasingly bringing back the employer match, and also contributing at higher rates.

A new report, entitled "The 55th Annual Survey of Profit Sharing and 401(k) Plans," released by the Plan Sponsor Council of America, reveals more companies are showing confidence in the defined benefit contribution system. As a result of this renewed confidence, more businesses are playing a part in helping workers build a sufficient nest egg. According to the results, the number of companies which made a matching contribution to their worker's retirement fund increased to 95.5 percent in 2011, up from 91 percent in 2010. The study noted the biggest increase was recorded among smaller businesses with fewer than 200 workers. In 2011, 92.8 percent of these enterprises provided that matching benefit, compared to 83.3 percent in 2010.

The report revealed that the average amount of contributions also increased during this time period. In 2011, the average company contribution rose to 4.1 percent of pay, up from 3.7 percent. The average participant deferral rate also rose to 6.4 from 6.2 percent of pay.

"The continued upward trend in participation and contribution levels is a result of the ongoing, sustained efforts of plan sponsors to effectively communicate their plan and educate their participants on the benefits of enrolling and staying in the plan," said Bob Benish, PSCA interim president and executive director. "Sponsors are looking beyond just increasing participation rates and are embracing plan design features that will make the plan more attractive to employees, while also making the plan more effective at increasing overall retirement readiness and financial health."

Non-employer sponsored accounts

While more companies are helping employees plan for their futures by offering a match, this is not always the case, making it important that workers take control of their savings initiatives. There are other retirement products - such as traditional and Roth IRAs - that may be equally effective in helping people build a nest egg. However, these accounts fall under different rules than 401(k)s, so investors may benefit from speaking with a tax preparer before enrolling to better understand how these products work.
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