Efforts to make it easier for employees to save for retirement combined with a strengthening economy have stimulated defined contribution (DC) retirement plan contribution rates and account balances, according to Deloitte’s Annual Defined Contribution Benchmarking Survey.Plan sponsors are embracing automatic enrollment, individual financial counseling and mobile transaction processing, Deloitte found.
What plan sponsors should learn from the survey is that “they should be looking at all of the avenues available to help participants best save for retirement,” Stacy Sandler, principal, human capital at Deloitte Consulting, tells PLANSPONSOR. “Defined contribution plans, both 401(k) and 403(b), increasingly represent the primary source of retirement savings for employees. Our research shows us that there is no single solution to engage employees, and new, creative methods are critical to address the varied needs of retirement plan participants. It is imperative for plan sponsors and providers to continue to work together in developing and offering these tools that make it easier for employees to save and plan for their future retirement.”
Cheryl Oullette, specialist master at Deloitte Consulting, adds: “The survey gives plan sponsors a good opportunity to step back and see what kinds of engagement tools are most prevalent and reassess what they are not doing. They need to take a look at the various ways they can get employees engaged, to understand the importance of the retirement plan and the need for retirement income. They should ask their providers if there are tools they could be using.”
The number one reason sponsors believe employees participate in their retirement plan is the desire to save for retirement, cited by 40% of sponsors. Last year, the number one reason they thought their employees participated in the plan was to take advantage of the company match. Average account balances grew nearly 4% to $99,022, up from $95,227 in 2014. The mean deferral percentage for non-highly compensated employees increased to 5.9%, a 13% rise from last year.
Fifty-five percent of sponsors have reviewed their retirement plan provider’s cyber security in the past year, and 25% have done so in the past five years. Eighty-nine percent of sponsors are either very or somewhat confident in their provider’s cyber security policies. “Cyber security is top of mind for nearly all organizations, and our survey shows a high level of confidence among plan sponsors that their providers have the necessary policies and procedures in place to protect sensitive information, which is encouraging news for plan participants,” Sandler says.
NEXT: An awareness problem
As to why workers do not participate in their DC retirement plans, 34% of sponsors said it is due to lack of awareness and understanding. To get their participants to become engaged, 83% of sponsors rely on general education, up from 73% in 2014. Sixty-eight percent use targeted communications, up from 56% in 2014, and 69% hold group meetings, up from 60% in 2014.
Nearly all (94%) plan sponsors either offer a match or profit-sharing contribution, and 6% of sponsors have increased their match in the past year.
“Our research highlights that while employee engagement is increasing, plan sponsors should continue to evaluate new methods of stimulating interest in saving for retirement,” says Michael Wilson, chief executive officer of the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists, which conducted the survey in association with Deloitte. “It’s critical that participants gain a clear picture of the savings they will need to meet their individual retirement goals, and it’s just as important for plan sponsors to do all they can to help their participants prepare for their retirement.”
Nearly 400 plan sponsors were surveyed for Deloitte’s report. The full survey can be downloaded here.