Getting Better – But Not As Much As You Might Think

If I were to sum up the results of our 13th annual Defined Contribution Survey in a sentence, it would be "not as much as you might think."

For instance, participation rates are up from a year ago, but “not as much as you might think” (73.8% in 2008 versus 72.7% in last year’s data). Similarly, automatic enrollment is up-but “not as much as you might think” (29.8% have adopted it this year, compared with 23% in 2007).

In addition, while one might well expect that those who embrace the concept of automatic enrollment would want to extend that to all workers (certainly if they intended to comply with the strictures of the Pension Protection Act’s automatic enrollment safe harbor), compared with last year’s responses-that’s right-“not as much as you might think.” In fact, among this year’s respondents, more than half-about 60%-of those who adopted automatic enrollment chose to apply it only to newly eligible participants. A year ago, that was 62.1%.

On the other hand, while 36% of the 2007 respondents had adopted automatic enrollment in the prior year, only about 29.5% of this year’s automatic-enrollment adoptees had done so in that time frame. This despite the fact that clear pluralities of respondents felt automatic enrollment had been “extremely successful” at encouraging younger and low-wage earners to enroll (39.4% and 35.4%, respectively), and the vast majority say that it has been at least somewhat successful at increasing awareness of the defined contribution (DC) benefit among all employees.

There has been an increase in the number of programs that have implemented contribution acceleration, but-well, you know-just 13.6%, compared with 11.5% in last year’s survey.

Interestingly enough, there has been movement in areas like participant loan usage-but “not as much as you might think,” and not in the direction you might expect. Plan sponsor respondents indicated that, on average, just 12.1% of participants had loans outstanding this year, compared with 12.9% a year ago, while the median number-10%-was unchanged.

Tomorrow – the Role of the Adviser