by Stephen Miller, CEBS
Employers are increasingly taking bolder actions to help ensure that participants achieve greater financial security through 401(k) and other defined contribution retirement plans, according to a 2013 survey by consultancy Aon Hewitt. The survey report, 2013 Trends & Experience in Defined Contribution Plans, reveals that organizations are doing the following:
Overall, nearly all businesses (98 percent) provide some sort of employer contribution to the plan. Almost three-quarters of employees save at a level equal to or above the company-match threshold. “Increasing the amount employers are willing to contribute may help encourage those employees to save at more robust rates,” according to the report’s analysis.
In addition, 53 percent of plans have corresponding immediate eligibility for employer-matching contributions, while 50 percent of plans that offer a nonmatching employer contribution allow immediate eligibility.
Target-date funds, which automatically shift assets toward more conservative holdings as the specified retirement year nears, are now offered by 86 percent of plan sponsors.
The largest increase came in the number of employers providing professionally managed accounts; just 29 percent did so in 2011.
“Different segments of the workforce prefer various forms of help,” said Rob Austin, director of retirement research at Aon Hewitt, in media release. “Some prefer to simply hand over the keys to their retirement savings to someone else—hence, the growing popularity of managed accounts—but a large percentage of employees prefer to take a more hands-on approach to directing their investments.”
The consultancy surveyed more than 400 U.S. plan sponsors, representing 10 million-plus employees, in plans that total $500 billion in retirement assets. For 77 percent of employers surveyed, defined contribution plans are the primary source of retirement income for their employees. When asked how they measure the success of their plans, employers’ top responses were “facilitates adequate retirement income” (18 percent) and “high participation rate” (17 percent).
Stephen Miller, CEBS, is an online editor/manager for SHRM.