An Aon news release said its 2008 Benefits & Talent Survey found only 10% of employers believe their employees understand to a great or very great extent the percentage of pre-retirement income they will need to maintain their current standard of living in retirement. Some 46% of employers said their employees only understand to some extent. The survey covered more than 1,100 U.S. organizations.
Meanwhile, 68% of employers who offer personalized Web-based retirement planning tools estimate that less than half of their participants used them in the past year.
class=”default”> Not only are many workers hazy about how much they will need in retirement savings, but other employees aren’t even in their employer’s plan, Aon found.
class=”default”> About 40% of organizations with DC plans have less than 70% of their workforce participating. According to 67% of employers, employees do not participate in the plan because they cannot afford to make contributions.
class=”default”> “Employers should strive for 70% or higher employee participation rates,” said Cecil Hemingway, executive vice president and Aon Consulting’s U.S. Retirement Practice leader, in the news release. “A mark of less than 70% indicates a poor plan, poor communication, or both. During this economy, employers should emphasize the financial advantages of contributing to a 401(k) plan, such as being able to reduce federal income taxes and receive employer matching contributions.”
class=”default”> Aon said employers are trying to help their employees get a better idea of their retirement savings needs:
- 65% of employers offer Web-based retirement planning tools;
- 56% provide retirement planning information from their recordkeeper, defined contribution consultant, or financial planning partner; and/or,
- 36% provide personalized retirement planning statements.
class=”default”> Finally, the poll also asked about steps employers are taking to boost participation. Some 92% of organizations offer an employer contribution, with about one-third of employers offering a 3% contribution for a 6% employee contribution.
class=”default”> Thirty percent of employers currently offer automatic enrollment and of those employers, 56% use a target date retirement fund as their default investment fund. Almost 18% of employers use automatic increases in defined contribution deferrals, Aon found.