Participant Activity Offers Clues for Improving Retirement Plans

January 10, 2014 ( – More employees are participating in employer-sponsored retirement plans, thanks to plan design changes, but there are still improvements that can be made.

By Rebecca Moore | January 10, 2014
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The Aon Hewitt 2013 Universe Benchmarks research report analyzes participant behavior across the participation rates, savings levels, plan balances, investments, account activity and demographics of more than 3.5 million employees eligible for defined contribution plans. Four key trends emerged: participation rates hit an all-time high, and saving rates increased slightly; automation plays a strong role in many savings behaviors; leakage declined while continuing to decrease from its peak in 2010; and diversification improved and balances recovered to prerecession levels.

According to Aon Hewitt, not only can plan sponsors use the report findings as a benchmark to learn how their workers’ saving and investing behavior compares to that of the average worker, they can be used to better understand general patterns of participant behavior across demographic groups. That knowledge can then be leveraged to better determine who might benefit from certain plan features or new opportunities to improve results. In addition, demographic analysis helps plan sponsors pinpoint which groups of workers may benefit from certain targeted communications.

According to the report, at 78.0%, the average participation rate for plans hit an all-time high and increased about two percentage points over last year. At 7.3%, the average before-tax contribution rate increased slightly from the low of 7.2% in 2011. The average Roth contribution rate was 6.0%—down from 6.4% in 2011. And, 72.5% of participants saved at or above the company’s match threshold, up from 71.3% in 2011. Notably, the participation rate among employees subject to automatic enrollment into their employers’ retirement plans is 81.4%, compared with 63.5% among those not subject to automatic enrollment.