Magazine article American Banker

Employee Participation in 401(k) Plans Underwhelming

Magazine article American Banker

Employee Participation in 401(k) Plans Underwhelming

Article excerpt

Four out of 10 corporate employees who have the option of participating in a 401(k) retirement savings plan do not take advantage of it, according to a new study.

The study, by KPMG Peat Marwick, found that only 61 percent of eligible emplo3|ees are conIxibuting pan of their salary into these tax-deferred savings plans.

The participation rate has held steady from 1993, according to the New York-based accounting firm's survey.

However. others in the business say the use of 401(k) plans continues to increase, as it has over the last five years, and one study puts the participation rate at 75%.

"The survey's results should be looked at in its proper context," said Bill Toedter, vice president of retirement plan communication and education at Bankers Trust Co., New York.

Large companies sometimes offer employees more than one retirement savings plan, resulting in less participation specifically in 401(k) plans.

However, these plans may be the only retirement option offered in companies with less than 200 employees, resulting in higher participation rates at those companies, Mr. Toedter said.

People now realize the responsibility of providing for retirement is shifting from the government to the employee, he said.

Mr. Toedter said employee contribution rates vary, often depending Oh whether or not the company matches contributions.

"Contribution rates are lower in companies that don't match," he said.

According to Peat Marwick's study, employees who participate in 401(k) plans contribute only about half of the allowed amount. Employees are generally permitted to defer 10% of their salary, up to $7,000 a year.

Still, many industry executives are predicting huge growth in the retirement savings plan business.

The 401(k) business is big and getting bigger, said Matthew Mintzer, vice president of retirement plans at Alliance Capital, a New York-based mutual fund company that markets 401(k) plans through banks. …

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