Every year, PLANSPONSOR surveys DC retirement plan sponsors from a broad variety of U.S. industries. Overall, there were over 4,400 responses in 2014. Below are some highlights from the report.
Plan Design
Despite studies showing the benefits of automatic enrollment and automatic escalation, 60% of companies still do not automatically enroll participants and 75% of companies do not automatically escalate. Surprisingly, more companies (47%) offer an employer safe harbor contribution to their employees than those that automatically enroll (40%). Of those that automatically enroll, 57% still set the contribution rate at 3% or lower even though statistics show there is no increase in the opt-out rate if moved to 6%.
Financial Education
40% of organizations do not offer any type of financial education. While this number is somewhat lopsided to the smaller end of the market (under $10mm), even 25% of largest organizations forego educating their participants. Those that do provide education, the two top areas of education were investing strategies (52%) and saving & budgeting (34%).
While companies may not offer education, almost three-fourths of them offer investment advice to their participants. More than half of these organizations over advice through their DC provider or a third party like Morningstar. Managed accounts will become a big topic of conversation in the next year with the most recent GAO report.
Participant Trends
While participation (77%) and deferral rates (6%) have stayed steady over the past few years, more and more employees are becoming immediately eligible to participate upon hire. This trend has increased over the years, with almost 75% of employers with eligibility period less than 6 months.
Even though it’s increased over the years, only 55% of companies offer a Roth contribution and this is consistent across the board from small to large plans. Our expectation is this will increase dramatically as it becomes more normal in discussion and more Millennials join retirement plans.
Retirement Readiness
Lastly, the survey asked plan sponsors to indicate their level of agreement with the following statement: “Most of our employees will achieve their retirement goals by age 65.” 28% of those surveyed agreed or slightly-agreed with that statement, while 58% disagreed or slightly disagreed. 22% of plan sponsors are undecided. This will become a larger factor in the future of retirement plans as “Retirement Readiness” turns into a household word in retirement plan committee meetings.
If you would like to learn more about the report, you can visit the PLANSPONSOR website at www.plansponsor.com.
