Participants Haven’t Shunned 401(k)s

A Hewitt Associates analysis shows that even while 401(k) participants are feeling the effects of a down market, they are continuing to invest for retirement through their 401(k) plans.

The analysis of 2.7 million U.S. employees indicates that the average 401(k) balance has dropped 14% in 2008 to $68,000, down from $79,000 in 2007, according to a Hewitt news release. In the past two months, on average, participants have lost nearly 18% of their 401(k) plans savings.

However, savings rates have only dropped slightly, from 8% in 2007 to 7.8% in 2008, and only 4% of participants have dropped their employee deferrals altogether, according to Hewitt.

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Shifting Investment Mix

While continuing to save, the Hewitt data show, participants are taking less risk with their savings. The amount of 401(k) assets invested in equities is at an all-time low (53.8% compared with 68.1% a year ago), Hewitt said. The number of employees making trades has risen slightly (19.3% verse 18.7% in 2007), but the amount of assets being traded has risen significantly (5.3% so far in 2008 verse 3.5% in 2007).

In October alone, 1.25% of participants’ balances were traded—almost three times the historical average (see Participant Transfer Activity Significantly Higher in October).

“The concerning behavior we are seeing…is some evidence of knee-jerk investment decisions, with a significant increase in the number of investment transfers immediately after the market drops. In the vast majority of cases, employees who impulsively respond to the fluctuations of the market can dramatically reduce their overall retirement savings, as employees are unlikely to readjust their investment portfolio when the market makes a turn for the better,” said Pamela Hess, director of retirement research at Hewitt Associates, in the news release.

Tapping into Retirement Savings

The Hewitt analysis reveals an uptick in the number of participants tapping into their 401(k) accounts. More than 6% of participants withdrew money from their 401(k)s in 2008, up from 5.4% in 2007. This was due to a surge in hardship withdrawals (16%), Hewitt said.

Some firms in industries especially hard-hit by the economy have seen hardship withdrawals by an excess of 10% of their population—nearly nine times more than the average 401(k) plan.

However, the analysis found loan activity has remained constant, with 22% of participants having a loan outstanding.

The Hartford Restructures Employer Markets Group

The Hartford Financial Services Group, Inc., announced a new organizational structure for its Employer Markets Group (EMG).

The company said the new structure is to better serve the group benefits and retirement plan needs of employers and their employees, optimize leadership talent, and drive growth opportunities.

According to an announcement, under the new organizational structure, Jamie Ohl, senior vice president, will lead the Retirement Plans Group (RPG). Previously, Ohl was responsible for product development and business retention. Ron Gendreau, executive vice president, will continue to lead the Group Benefits Division (GBD).

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Marty Swanson, vice president and chief marketing officer, will lead marketing for both GBD and RPG, and is now responsible for ensuring consistent messaging for the organization and uncovering unique business opportunities across EMG’s markets. Harry Monti, senior vice president, is responsible for leading operations and service for EMG, as well as leading the integration of RPG’s recent acquisitions and helping to develop a multi-site strategy across EMG.

Earlier this year, The Hartford completed the purchase of three retirement plans businesses: TopNoggin of Powell, Ohio (see Hartford Extends DB Technology With Acquisition); the Princeton Retirement Group’s alliance business of Atlanta and Winston-Salem, North Carolina (see Hartford Scores a Hat Trick); and SunLife Retirement Services of Boston and Phoenix (see Sun Life Sells US RK Biz to The Hartford).

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