Not surprisingly, 67% of DC 401k plan sponsors feel great responsibility and are committed to helping their employees achieve more financially dignified retirements.
This is most evident in plan design, as many sponsors are choosing to implement automatic features like auto enrollment, employer matching contributions, and automatic deferral escalation. Qualified default investment alternative (QDIA) offerings like target date funds, along with periodic enrollment of non-participants, are also on the rise as a way to engage more employees with their 401(k) plan and help them prepare for retirement.
Recent research from T. Rowe Price found that 67% of large 401(k) plan sponsors believe they have “a great deal” of responsibility in improving participant retirement readiness and helping them create adequate income for their post-career years. Another 32% said they feel somewhat responsible for their participants’ retirement preparedness. That’s nearly 100% — clearly, large plan sponsors are tuned in to their participants’ needs, and are committed to helping them achieve results.
As such, they are choosing to implement helpful plan features to aid participants in achieving their retirement goals. A full 89% of large 401(k) plans offer employer matching contributions, and another 2% expect to offer this feature in the next two years.
When it comes to auto enrollment — participants are automatically enrolled into the 401(k), either at date of hire or after a waiting period pre-determined by the employer — 72% of plan offer this feature, with 6% expecting to offer it in the next two years. More than half (58%) have auto escalation, where a participants’ deferral rate is increased automatically each year, and 11% plan to add this feature within two years.
Nearly half (48%) of large 401(k) plans periodically enroll non-participating employees, and another 58% have an investment reenrollment program to default participants into a qualified default investment alternative (QDIA) like target date funds. Plan sponsors may choose to offer a re-enollment to help employees get their retirement savings on track. During reenrollment, employees have the option to shift their savings from more risky investments, for example, into the default option, which can help enhance diversification, potentially lower investment fees, and help improve their risk profile.
These tactics seem to be moving the needle on retirement preparedness. According to the T. Rowe survey, 63% of large 401(k) plan sponsors feel much better or somewhat better about their participants’ retirement readiness compared to two years ago. Clearly, their commitment to helping participants achieve their retirement goals is paying off.
Implementing plan features that make it easier for participants to take advantage of your 401(k) plan make a difference when it comes to helping improve retirement readiness. If you’re not already, consider adding more automatic features to your 401(k) plan to help participants make the most of it. If you are, kudos — you’re on the right track toward helping your employees achieve the retirements they’re working for.
