Plan Sponsors and Participants Stay Strong, Crave Basics Moving Forward
Comprehensive report from The Principal reveals retirement savings trends
September 9, 2009 (Des Moines, IA) —Even with large losses in retirement account balances, 19.2 percent of participants in plans with services provided by the Principal Financial Group® actually increased contributions to 401(k) plan accounts in 2008, which is more than the combined total of those who stopped contributing or decreased their contribution (16.5 percent).
Other key findings in The Total View 2009, a newly released report on retirement savings trends from The Principal®, include:
- Staying the course: despite the volatile environment, retirement plan participants and plan sponsors largely stayed the course in 2008, showing remarkable restraint and focusing on their long-term goals
- Getting personal: where personalized, one-on-one guidance at the worksite was offered, participation and savings rates were even greater (with participation at 75.5 percent compared to 66.1 percent and salary deferral rates at 7.3 percent compared to 6.9 percent)
- Back to basics: plan sponsors are seeking retirement plan services that go back to the basics and bring highly valued services at a reasonable price
The Total View 2009 is based on calendar-year 2007 and 2008 data from plans with services provided by The Principal and third-party research. A new analysis section provides additional insight into retirement trends and what they may mean for retirement plan participants, plan sponsors and the retirement industry.
"The Total View 2009 is particularly valuable because it reflects retirement savings trends during unprecedented market conditions," said Barrie Christman, vice president of individual investor services at The Principal. "While it was impressive to see that plan sponsors and participants held firm in 2008, we see them reacting more to the challenging realities of the ongoing recession this year."
The report includes early 2009 data that indicates participants and plan sponsors are making changes. As of June 1, 2009, 4.9 percent of employers have made a change to their matching contribution formula since the beginning of 2009. This is compared to 4.7 percent for all of 2008
"We believe this is a direct reflection of the economy taking a downturn and plan sponsors not having the funds to put into the plan," said Christman. "It's important to note that making a change doesn't necessarily mean a reduction. Many plans are moving from a stated match to a discretionary match, while others are adding maximums to the amount they will match. And keep in mind this is still a very small percentage of overall plans."
Other findings in The Total View 2009 include:
- Rollover rules: in 2008, nearly 90 percent of assets that became available for distribution remained invested for retirement versus being cashed out, a trend that was consistent with prior years
- Match makers: employer-made contributions increased or stayed the same across all industries in 2008 with the overall match increasing slightly to 40 cents per dollar deferred
- Plunging pensions: the average funded status of defined benefit plans declined sharply, dropping from 95 percent in 2007 to 77 percent in 2008
- Highly valued by highly compensated: average employee contributions to nonqualified plans held steady while employer contributions ebbed and flowed, indicating key employees value this benefit independent of employer contribution
The Total View 2009, along with a "Fast Facts" report summary, is available for download at www.principal.com/totalview.
About The Total View
The Total View is the only report of its kind that covers all of the core retirement plan designs: defined contribution, including 401(k) and 403(b); defined benefit; nonqualified; and Employee Stock Ownership Plans (ESOP). 2009 marks the sixth year The Principal has produced The Total View.
About the Principal Financial Group
The Principal Financial Group® (The Principal ®) is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance, and banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $257.7 billion in assets under management and serves some 18.8 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.
- Nearly 44,000 retirement plans for 2007 and more than 43,000 plans in 2008; 4.5 million participants in 2007 and 4.7 million participants in 2008
- Based on plans using the prototype plan document of The Principal
- Calculated on a FASB PBO basis
- "The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
- As of June 30, 2009