Bad Timing?

401(k) plan sponsors, unable to persuade employees to enter into plans in the 1980s and 1990s, were finally seeing broad participation in 2008, just before the financial markets all but collapsed. Now, employers are in the unenviable position of defending workers' investment in high-return, risky assets. According to Greenwich Associates' new U.S. Defined Contribution (DC) Pension Plan Research Study, enrollment of eligible employees into corporate 401(k) plans was 79 percent in 2008, up several percentage points from 2006. More than four out of 10 large DC programs and almost 50 percent of smaller programs automatically enroll workers into corporate 401(k) plan unless they opt out. As businesses have begun adopting automatic enrollment, they have also been changing default investment options from conservative funds to target retirement date funds that frequently expose the funds' equity to more risk. Participants in these plans are hit particularly hard by recent economic failures, as many employees have a large chunk of their personal equity--and in some cases, their total retirement savings--bound up in a DC plan.