Balances in 401(k) retirement plans hit record levels in the fourth quarter and smaller employers started to catch up in restoring company matches to the key savings vehicles, according to survey data released on Wednesday by Fidelity Investments.
The average balance in accounts at Fidelity, the largest U.S. retirement savings plan administrator, was $71,500 at the end of 2010 compared with $64,200 a year earlier and $50,200 at the end of 2008 at the depth of the financial crisis.
The previous quarterly peak in average balances was $70,000 reached in the third quarter of 2007.
Rising financial markets accounted for two-thirds of the increase in 2010, said Fidelity Vice President Beth McHugh, who oversees the area.
New contributions from workers and their employers accounted for the remainder.
McHugh said Fidelity plan participants are using tools on the company's website more often to track their savings and change asset allocations.
"Engagement from participants is at an all-time high," she said.
As the operator of retirement plans for more than 11 million workers, Fidelity's quarterly report is closely watched as an indicator of the status of retirement savings.
Many U.S. companies have dropped traditional "defined benefit" pension plans in favor of "defined contribution" plans such as 401(k)s that expose workers to more market risks. The private plans have also grown in importance as politicians propose cuts to Social Security.
But many plans took big hits as stock prices tumbled during the financial crisis and many workers have also borrowed against their retirement savings, forfeiting the tax advantages the plans were designed to provide.
Some companies also reduced or suspended matching contributions to employees' retirement plans during the economic downturn, and not all have reinstated those matches.
Fidelity said 8 percent of its plan sponsors trimmed or eliminated matches during 2008 and 2009. Of those, 55 percent have now restored their matches or plan to do so.
Among large companies, those with 5,000 or more employees, 71 percent have restored matches or plan to do so—the same level Fidelity reported a year ago. Among smaller companies, or those with between 500 to 1,000 employees, 61 percent have restored their matches or plan to do so, up from 38 percent a year ago.
McHugh said the pattern resembled the recession in the early part of the last decade, when smaller companies were slower to restore their 401(k) contributions.
Nancy Hwa, spokeswoman for the Pension Rights Center, a Washington consumer group that tracks retirement issues, said the catch-up by smaller companies over the past year suggests their cash flow is starting to improve.
"It seems to me to be an indication of an improved economy and also a recognition that the match is important to their employees," Hwa said.
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