Fewer Workers Opt For 401(K) Plans
November 14, 2002
For the first time in nearly 20 years, many employees are abandoning 401(k) retirement plans for a variety of reasons, analysts report.
- In the past year, the average participation rate fell 2.5 percentage points to 75 percent, according to a survey from PlanSponsor.com.
- Workers' savings rates have also fallen for the first time -- dropping to 7 percent from a peak of 8.6 percent in 1999, according to the consulting firm Spectrem Group.
- The drop in worker participation was even more dramatic among large plans -- where participation fell nearly 6 points from 2001 to 2002, to 73.7 percent.
- The new trend is a source of great concern to plan sponsors, who fear that employees will not have adequate financial resources when it comes time to retirement.
A number of reasons are being advanced to explain the participation fall off.
They include an aversion to risk in the current stock market, job layoffs and shaky personal finances, as well as escalating health insurance premiums that are reducing workers' disposable income.
Source: Christine Dugas, "More Workers Say No to 401(k) Plans," USA Today, November 14, 2002.
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