Generous match, easy entry
keys to participation success
» How Do They Do It?
Even if you build it, they don't always come. Ask any
plan sponsor that has taken the time, energy, and expense
to craft and sustain a competitive workplace retirement
savings plan. On an industrywide basis, participation
ratesand this is among people who are eligible to take
advantage of the programshave never registered much above
the 80% mark. Think about that for a second. Despite
decades of retirement savings education, those "free money"
company matches, the sanction of tax deferral, and the
much-vaunted convenience of payroll deduction, roughly one
in five participants decides to "just say no."
That, of course, is in the best of times. Of late, the
picture has been even gloomier.
2003 Defined Contribution Survey
found an overall participation rate of less than 75% in all
market segmentsas those rates declined for the second year
However, despite soft markets, an uncertain economy, and
rising benefit costs, a number of plan sponsors continue to
succeed in maintaining, and expanding, their current
participation base. In the pages that follow, we recognize
some of the best, not just in terms of participation rates,
though that is the ultimate validation of a successful
programand the average rate of participation in these
programs was 95.5%. Rather, these employers have achieved
these rates through a combination of stratagems, education,
and program design that can serve as a blueprint for
programs with even the most respectable rates of
How Do They Do It?
There is nothing like a company match (or flat out
employer contribution, in the case of a profit-sharing
program) to provide participants with the very best
incentive to save for retirement. Nearly 83% of the Top
Defined Contribution Plans offered a match, compared with
75.6% among the nearly 3,500 plan sponsor respondents to
our 2003 Defined Contribution Survey.
Furthermore, a generous match appears to pay off
handsomely, based on the experience of the Top Defined
Contribution Plans listed in the pages that follow. It is
striking, though perhaps not surprising, how many transcend
the industry "standard" of 50 cents on the dollar up to 6%
of employee pay. Indeed, many offer a match that is more
generous than a full dollar for dollar.
It also seems clear that a key element is to make it
easy for workers to become participants. A growing number
of employers have embraced "automatic enrollment"a process
whereby employees are enrolled in the retirement plan
automatically when they become eligible unless they
specifically opt out. This strategy leverages the
traditional bane of employee participationinertiaand uses
it to the participant's advantage. Proof of the pudding?
Roughly half of the 35 plans in our top list employed the
strategy, compared with just 18% of the respondents to our
2003 Defined Contribution Survey.
Allowing employees to participate immediately also can
make a difference in boosting participation. While doing so
may entail additional administrative work in high-turnover
industries, there is little question that employees given a
chance to sign up for retirement savings alongside their
other benefit forms, tax paperwork, and beneficiary
designations, seem more likely to act than those who, a
year after their employment begins, are asked to consider
the option. Just ask the 19 plan sponsors among the Top 35
that currently permit this.
As for vesting, while three years appears to be
something of a standard, more than a third of the Top DC
Plans detailed in the pages that follow vest participants
100% immediately in their accounts.
Other characteristics of interest (Top DC Plans vs. 2003
Defined Contribution Survey):
• 23.8 investment options offered, compared with 16.7
• 48% offer investment advice, versus 43.5% overall
• 34.3% offer company stock, compared with 12.1%
• 25.7% offer self-directed brokerage, versus 22.1%
Less quantified, but no less evident in the pages that
follow, is the significance of educating and promotingand
reeducating and continually promotingthe importance of
saving for retirement.
In sum, make saving for retirement easy, make it
worthwhile, make it importantand participants will respond