A Towers Watson survey of 371 U.S. employers that offer a 401(k) plan as their primary DC retirement plan revealed only one in five respondents (22%) believe employees generally make informed decisions about their retirement savings, and only 26% believe their employees have realistic expectations about what DC plans can provide. Nearly one-half of respondents (48%) expect a greater number of older workers will ultimately delay retirement.
This lack of confidence is despite the fact that employers have made successful efforts to increase employee participation and deferral rates. More than half of respondents (56%) reported employee participation levels at or above 80% this year, compared with 50% two years ago. The higher participation rates are primarily the result of employers using automatic enrollment, with nearly two in three respondents (65%) now using this feature, compared with 51% in 2009. To encourage adequate participant savings rates, 71% of those that use auto-enrollment also use automatic contribution escalation, which allows a gradual increase in contribution levels over a certain period of time. Employers are also becoming more transparent about fees, with more companies now charging participants direct, equal-dollar recordkeeping fees. One-third of respondents now pay recordkeeping fees through revenue sharing, which represents a decline from 42% in 2009.