The number of plans utilizing deferral step up programs has also increased from 5% last year to 16%, according to the executive summary of the survey report.
As of the end of 2005, the proportion of surveyed plans with more than 70% of eligible employees participating in their 401(k)s rose to 67% versus 63% in the prior year. The number of plans with participation rates exceeding 90% rose to 24%, up from 19% last year.
Almost half (49%) of plan sponsors surveyed now allow for immediate 401(k) plan eligibility for news hires.
Sponsors also seem to be shying away from encouraging participants to invest in company stock according to the results of this year’s survey. The percentage of sponsors making matching contributions in company stocked dropped to 12% from 15%. In addition, according to the summary report, 68% of respondents that match employee contributions with employer stock now allow employees to immediately reallocate those matches to other funds, whereas only 55% of last year’s respondents did.
However, lifestyle funds are rapidly growing in popularity as investment choices in 401(k) plans. Forty-four percent of this year’s respondents offer them versus 28% of last year’s respondents.
Other key survey findings include:
- Respondents recognize the necessity of multiple avenues of communication to get across essential messages. More than 60% of respondents use Web sites, generic and customized printed materials, personalized printed materials, “targeted” mailings, e-mail, and retirement modeling software.
- Most respondents are assessing 401(k) vendor service levels by looking at accuracy of data, turnaround time on reports, call center performance, and processing times on plan loans and withdrawals. Respondents are less inclined to hold vendors directly responsible for participation rates or participants’ diversification of their investments. Overall quality of service ratings for 401(k) vendors was 4.03 (on a five-point scale; 5=excellent), versus 4.08 in last year’s survey.
- 80% of those surveyed believe their 401(k)s are effective as recruiting tools (up from 78% in the prior survey). Also 71% consider their plans to be helpful in retaining employees.
- Only 13% of survey respondents agree with the statement that “most employees are/will be financially prepared for retirement.” Sixty-six percent accepted the general assessment that “some” employees would be prepared, and 21% believe “very few” workers are or will be financially prepared for retirement.
Respondents to this year’s survey included 830 401(k) plan sponsors representing the full spectrum of industries, geographic regions, and company sizes.
Full Deloitte survey results are here .
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