A new study finds that while employers don’t necessarily plan to cut back on current features in their 401(k) plans, they do plan to delay enhancements, citing costs

  • Among those employers that don’t currently offer automatic enrollment, only 25 percent are likely to add it for new hires, and just 15 percent are likely to adopt it for existing employees in 2009–down from 57 percent and 27 percent, respectively, in 2008–citing the increased cost of the employer match as the primary reason why they did not plan to offer it.

  • Just 2 percent of employers have cut or temporarily suspended their 401(k) company match since the markets tumbled in late 2008, and 5 percent are expected to do so in 2009. However, Hewitt experts believe it is possible that upwards of 10 percent of companies could potentially take that step in the coming 12 to 18 months.

  • 77 percent of employers now offer target-date funds–up from 66 percent last year–and among those that do not currently offer them, over 53 percent plan to add them to their plan in 2009.

  • 49 percent of companies offer automatic rebalancing, and another 20 percent are likely to add the feature in 2009.

  • Employers plan to step up their communication efforts on weathering the markets by staying properly diversified (91 percent), staying the course and investing for the long term (87 percent), and rebalancing on a regular basis (50 percent).

The study also found that investors have become more conservative in their investments since the financial crisis of fall 2008. And there is some concern among employers that employees who invest more conservatively will miss out on gains when the market rebounds.

And another interesting point – 29 percent of employers offer a Roth 401(k) plan, up from 19 percent in 2008. Of those companies who don’t currently offer a Roth 401(k), 12 percent plan to add one this year.

The study was conducted by Hewitt Associates, a human resources consulting firm based in Lincolnshire, Ill. The company interviewed 150 mid- to large-sized employers.

Feb. 2, 2009.