Executive Briefing

Firms Improve 401(k) Plans

More employers are realizing that 401(k) participation isn't enough to prepare workers for retirement.

A survey by human resources consultant Hewitt Associates found that a growing number of companies are structuring their 401(k) plans to improve the quality of employee participation once they're enrolled. One new focus is on whether a 401(k) plan provides an adequate retirement income for employees.

Hewitt says this differs from an earlier practice of only making sure that workers participate in company 401(k) plans.

The survey found that only 25% of firms now view high participation as the main measure of success of their 401(k) plans, down from 43% in 2005.

Unless workers opted out, the survey says 77% of companies put their employees in a diversified portfolio, such as target-risk, target-maturity or balanced funds. This was up from 39% in 2005.

The biggest winner was target-maturity portfolios, pegged to retirements, with more than 50% of plans utilizing them as a default.

The survey also found that one in five companies, or 20%, increased their employer matching contribution over the past two years to bolster worker retirement funds.