Among the results of The Principal’s research of 30,000 full service plan sponsors and 2.4 million participants, was that the average participation rate is 6% higher in defined contribution plans that offer automatic enrollment.
Three-step easy enrollment methods also increase participation rates. The report said that in 2005, plans that used The Principal’s Easy Enrollment increased their participation by 3%.
Both deferral rates and participation rates were also higher among those DC plans using one-on-one retirement plan assistance services. The average deferral rate and participation rate for plans using such services were 7.5% and 73.3%, respectively, compared to the 7.1% deferral rate and 68% participation rate for other plans.
Offering higher matching contribution rates seemed to also stimulate retirement savings among participants. According to the report, participation rates increased by 12% as employers moved from a 25% company match to a 100% match, and participation rates are higher for companies offering a 100% match versus companies offering no match.
The report also revealed that 70% of plan sponsors offered a lifecycle investment option in 2005 – a significant increase from 2004, when less than 40% of sponsors offered lifecycle funds. By the end of 2006, more than 80% of plan sponsors were offering lifecycle investment options. Additionally, t he number of plan sponsors using a lifecycle investment option as their retirement plan ‘ s default investment option nearly tripled in 2005 from the previous year.
For the full report go here .
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