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| Principal Financial Group Annual 401k Report Bucks Trend
Smaller Companies and Employees Show More Commitment, Prudence in Retirement Planning than Large Company Peers DES MOINES, Iowa--(BUSINESS WIRE)--Aug. 29, 2003--The Principal Financial Group(R), the nation's 401(k) leader, today announced key findings from its 2003 Annual 401(k) Report, an in-depth look at trends among its 27,000 401(k) plan sponsor clients and nearly 2 million 401(k) participants who demonstrated positive savings and investment behavior despite the difficult economic environment and volatile markets of the past year. Adaptive intelligence for a serious advantage: business, investment and technology- BizVantage! The study --the most comprehensive report of its kind focusing on trends among small and medium-sized businesses and their employees-- found that plan participation increased year over year, as did 401(k) deferrals. Further, the vast majority of companies are continuing to provide a 401(k) match. The survey calls attention to a critical segment of the American economy, as collectively small- and medium-sized firms throughout the country account for more than 99 percent of American companies. The Principal(R) leads the 401(k) industry in serving this segment, with 23,000 of its 27,000 401(k) plan sponsor clients employing fewer than 1000 employees. "Contrary to recent headlines about Fortune 500 companies cutting back on retirement benefits for employees, in the often overlooked small and medium-sized business sector, the opposite trend is playing out. These businesses are at a minimum holding steady and many are actually improving their retirement plan benefits. Further, smaller-company employees, who often benefit from a more personalized, intimate work environment, are saving at higher rates than their large company employee peers," said Larry Zimpleman, executive vice president, retirement and investor services at The Principal. "To ignore this crucial segment of the labor market is painting an overly pessimistic view of the real story, which is one of commitment and prudence in retirement planning by the vast majority of American workers." The report found that companies with fewer employees tend to have higher participation rates. Larger companies generally find it more difficult to communicate plan features with employees at multiple locations. Also, some larger plan sponsors may have multiple retirement or savings plans available. Overall plan participation increased 2 percent this year versus the prior year. The individual deferral rate increased slightly from 6.3 percent to 6.5 percent of salary. The highest deferral rate is achieved by employees earning between $30,000 and $50,000 per year. "Both employees and employers play important roles in this retirement savings success story," said Zimpleman. "Employers continue to provide a strong incentive to save by offering an attractive match. The Study showed a strong correlation between plan sponsor matching contributions and high deferral percentages. It found that the employer discretionary match actually increased slightly this year to an average of $0.36 per dollar employee contribution from $0.35. Education continues to improve with 35 percent more participants accessing online tools to help them with their planning needs this year. While online tools are being increasingly used, plan participants most value in-person education, according to a new SPARK Research Group survey which ranked The Principal #1 for plan participant education satisfaction with 67 percent registering "very satisfied" versus an industry average of only 47 percent "very satisfied." "The overall trend of increased participation and deferral is promising, yet there's still work to be done, especially among many younger employees who procrastinate," said Zimpleman. The Study found that 42 percent of eligible employees under the age of 35 do not participate in a company-sponsored retirement savings plan. "We know that their savings burden is going to be exponentially greater the longer they delay participating in a 401(k) or similar plan." Methodology The 2003 Annual 401(k) Report from The Principal is based on data from the 27, 000 plans and 1.9 million participants for which The Principal provides investment and recordkeeping services. Data for participation and deferral rates is drawn from actual nondiscrimination tests The Principal performs for a large majority of its client base, unlike other industry studies which typically are based on plan sponsors' perceptions of current plan trends, not factual test results. For a copy of the 2003 Annual 401(k) Report visit www.principal.com. About the Principal Financial Group The Principal Financial Group(R) (The Principal(R))(1) is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance and mortgage banking through its diverse family of financial services companies. More employers choose the Principal Financial Group for their 401(k) plans than any other bank, mutual fund, or insurance company in the United States(2). A member of the Fortune 500, the Principal Financial Group has $128.0 billion in assets under management(3) and serves some 14.8 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com. (1) "The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group. (2) CFO Magazine, April/May 2003, based on total plans served in 2002 by insurance companies, banks and investment firms. (3) As of June 30, 2003.
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