Employers are clearly more optimistic about the economy, for another 40% that had suspended 401(k) contributions will resume them by mid-2011, doubling the 40% that already have resumed suspended or reduced matches, the Profit Sharing/401(k) Council of America announced.
Overall, however, the vast majority of 401(k) plans did not suspend or reduce their matches, the council found. Since 2008, only 14.8% suspended matching contributions. More than 70% made no change to matching contributions, and nearly 10% actually increased them in the past three years.
"Companies continue to make their 401(k) plans a top priority," said David Wray, president of the Council. "Those that have suspended their matches are in the process of restoring them, and companies are aggressive restructuring their investment lineups."
Employees are also continuing to contribute to their plans. Nearly 40% of companies said their workers have made no changes to their contributions, but 31.6% said their workers have increased their contributions. However, among those companies that suspended matching contributions, 78.1% said their workers have decreased participation in their 401(k) plan - indicating how powerful a motivator company matches are.
And plan sponsors have become more involved, too, with 94% having a committee to monitor fund performance, and more than half changing their investment lineup in the past year, replacing poor performing funds with better choices. And 72.2% have scrutinized their plan's fees, up from 55.4% that did so in 2009.
Investors to Return to Equities in 2011: Aberdeen
With low interest rates set to persist, yield will become the all-encompassing priority for investors in 2011, prompting them to move out of government bonds and cash back into equities, corporate bonds and real estate, Aberdeen Asset Management predicts.
Investors have favored emerging markets in recent months, and Aberdeen expects that to continue, with developing regions "powering global growth in 2011 and beyond."
Equities offer competitive dividend yields compared with government bonds, and real estate has a yield advantage, too, Aberdeen said. Rents are set to increase once a sustainable recovery arrives, and also in light of weak development activity across all property sectors in recent years.
Volatility will continue, however, due to sovereign debt and inflation fears. "Volatility is likely to be sustained and correlations high, lending alternative assets a greater role in smoothing multi-asset portfolio performance," said Mike Turner, head of global strategy and asset allocation at Aberdeen.
"In 2011 and beyond, global economic growth will be powered by Asian and emerging regions," Turner said. "Indeed, we'll see an increasing polarization of East versus West in terms of economic performance and monetary policy response. Investors may continue to worry about inflation, but thanks to anemic growth in the developed world, we think the threat is confined to emerging regions"
Corporations in emerging markets will offer strong earnings in 2011, but valuations are rising, Aberdeen said. Thus, another emerging markets play is to invest in multinational corporations.