Charles Schwab Releases Data on Employer and Worker 401(k) Behavior

Data Reveals Employer Commitment to Adding Plan Features and Increase in Overall Plan Participation

Wednesday, June 10, 2009 6:00 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NASDAQ:
SCHW

SAN FRANCISCO--(BUSINESS WIRE)--Charles Schwab today released new 401(k) plan data indicating that while the economic downturn has impacted some aspects of employer and worker behavior in plans, both groups have largely stayed the course and remained committed to their plans. According to the data, overall employee participation in 401(k) plans serviced by Schwab increased in 2008 compared to 2007, and although the number of employers offering matching contributions declined in 2008 and into early 2009, employers continued to expand features available to plan participants.

Employers are keeping most 401(k) features on track. According to data taken from Schwab retirement plan clients, many employers continued to increase the features and offers available to plan participants from 2007 to 2008, with notable increases in plans providing 401(k) advice and a Roth 401(k) option.

 
Feature  

Percent of plans
offering in 2007

 

Percent of plans
offering in 2008

Participant 401(k) advice   58%   62%
Target/Life cycle funds   62%   65%
Auto enrollment   24%   32%
Auto savings increase   6%   10%
Roth 401(k)   37%   45%
Employer match   78%   70%*

*Employer match data through March 31, 2009

Employer matching contributions show slight decrease. According to data for plans at Schwab, a significant majority of employers continued to offer a 401(k) match in 2008. Overall, 70 percent of employers in Schwab-administered plans offered a match through March 31, 2009, down eight percent from 78 percent in 2007. In addition, eight percent of plan sponsors working with Schwab had reduced their match as of March 31, 2009.

“Our plan sponsor clients remain committed to 401(k)s even though many of them are facing budget constraints across their businesses,” said Robyn Alcorta, Charles Schwab vice president of 401(k) plan services. “While we are seeing some employers that have had to make cuts, including on the employer match, most have indicated that they intend to reinstate these features just as soon as they can.”

Participants remain engaged despite difficult markets. In 401(k) plans serviced by Schwab, overall plan participation increased to 77 percent in 2008 from 73 percent in 2007, largely due to employers’ continued commitment to automatic enrollment programs heading into 2008. Plans with between 500 and 1,000 participants displayed the highest participation rate (88 percent).

“Based on what we are seeing from participant behavior, the 401(k) continues to be a very important savings tool for many Americans,” said Catherine Golladay, Charles Schwab vice president of 401(k) participant education and advice. “Understandably, we are seeing some slight decreases in individual savings levels given the pressures that many are feeling, but the vast majority of people are staying engaged in their plans and doing their best to continue saving.”

Plan participants have not made large-scale changes in their 401(k) portfolios. The market and economic environment in 2008 does not appear to have driven plan participants to make significant changes in their 401(k) asset allocation. The most significant change in plans serviced by Schwab in 2008 compared to 2007 was a seven percent shift of assets from Large Cap (decreased an average of 4.52%) and International Holdings (decreased an average of 2.28%) moving primarily into Stable Value (increased an average of 2.90%) and Fixed Income Products (increased an average of 3.79%).

Hardship and loan activity remain relatively unchanged. Comparing the third and fourth quarters of 2008 to the third and fourth quarters of 2007, the average percentage of participants taking hardship withdrawals in plans serviced by Schwab remained under one percent year over year (.55% compared to .47%). The number of people taking loans from their 401(k) plans actually decreased to 5.67 percent in 2008 from 5.91 percent in 2007.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.5 million client brokerage accounts, 1.5 million corporate retirement plan participants, 544,000 banking accounts, and $1.2 trillion in client assets as of April 30, 2009. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at www.schwab.com. (0609-9449)

Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=5983663&lang=en

Contact:

Charles Schwab
Michael Cianfrocca, 415-667-0344
michael.cianfrocca@schwab.com
or
Intermarket Communications
Clayton McGratty, 212-754-5425
cmcgratty@intermarket.com

Multimedia Files:

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Robyn Alcorta, Charles Schwab vice president of 401(k) plan services (Photo: Business Wire)
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Catherine Golladay, Charles Schwab vice president, 401(k) participant education and advice (Photo: Business Wire)

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