According to research by Cogent earlier this year, fees are still driving the decisions of companies sponsoring a defined contribution (DC) plan like 401ks and 403bs, it’s no wonder that their more recent research shows the use of company match and auto features declining.
Fee reduction had been the biggest driver for plan sponsors changing record keepers based on the May 2016 Cogent survey followed by compliance and preparing people for retirement, which was up in 2016. Though increasing enrollment and deferral rates remained a priority in 2016 for plan sponsors, the number was down in 2016. Other top issues include re-evaluating investments and service providers, employee education and plan design.
The more recent Cogent whitepaper shows a wide disparity of opinion on who has the primary responsibility for preparing employees for retirement. A greater percentage of smaller companies believe that participants carry that burden while larger employers believe that the company is primarily responsible. About one quarter of all plan sponsors believe that service providers are responsible.
Though there is no change in the use of automatic enrollment at 29%, larger companies are more likely to adopt it at 51%. There was a marked decline in the use or auto-escalation and rebalancing with escalation down from 17% in 2015 to 13% in 2016 and re-balancing down from 26% to 19% over the past two year according to Cogent. There is a hint that these auto features could increase next year with 17% indicating that they are likely to adopt them up from 6% in 2015.
Though 80% of plans offer some form of advice, smaller plans are more likely to use an advisors with just 15% overall offering one on one help.
Most concerning is the fact that fewer companies are offering a company match across the board regardless of the size of the company from 57% overall in 2015 to 50% in 2016 perhaps due in part to the focus on costs which may also be hurting some of the auto plan features.
So regardless of what we hope will change with smaller employers, the majority still believe that employees have the responsibility to make sure they have enough money to retire and they continue to focus on costs and compliance with contributing a match and some auto-features that would really help taking a back seat – at least for now.
