Half of Plan Sponsors Offer Auto Enrollment

The second annual Retirement Plan Survey by Mesirow Financial Retirement Plan Advisory found that 50% of plan sponsors surveyed offer automatic enrollment features, and one-third include a step-by-step deferral rate option.

According to the survey, plan sponsors are hopeful that positive strides continue in educating participants on the merits of participating in their retirement plans. The lack of participant understanding and appreciation of the retirement plan benefit is a major concern, yet satisfaction levels seem positive. In many circumstances, the provider community has offered multiple options in trying to meet the educational requirements and needs of both the plan sponsor and participants.

When asked how they would characterize overall participant satisfaction with different planning tools and, options available through the participant website materials and meetings to help reach saving goals, 14.4% of respondents said they were very satisfied; 75.6% were satisfied; 5.6% were not satisfied; and 4.4% do not use these options.

Since the finalization of the Pension Protection Act, target-date funds (TDFs) have grown exponentially both in usage and in assets. The trend continues in Mesirow’s latest findings as plan sponsors use TDFs for double duty as a plan’s QDIA and also as a managed account strategy. The majority (72.4%) of respondents do offer TDFs, while 27.6% responded they do not. 

Implementing fee disclosure is at the forefront for 2012. Mesirow’s research suggests that plan sponsors allocate the right amount of time and resources to ensure all regulations are addressed to the satisfaction of the Department of Labor (DOL), and that employee communications are effective. Plan sponsors, along with their providers, should maintain a careful watch as fee disclosure rolls out in 2012. Respondents were asked, “Is your outsourcing provider communicating all fee disclosure regulations to your satisfaction [e.g., 408(b)(2), 404(a)(5)]? The majority (90.5%) said yes, while 9.5% stated no.

A surprising find is that 34.4% of plan sponsors said they do not know if their adviser or consultant is acting as an investment co-fiduciary. Only 36.1% said yes, as a 3(21) fiduciary; 1.6% said yes, as a 3(38) fiduciary; and 27.9% said no.

Non-Qualified Plans 

When asked if highly compensated employees (HCEs) limited their voluntary contributions to the retirement plan due to non-discrimination testing results, 13.1% said yes, all HCEs are limited to a set percentage contribution limit each year, which is less than the maximum percentage allowed under the plan; 29.8% stated yes, some HCEs receive a portion of their deferrals back to them taxably after testing results are known; and 57.1% said no, all employees, whether highly compensated or not, are eligible to contribute to the retirement plan up to the maximum allowed by the IRS.

In regard to the types of non-qualified plans employers offered, 25% offer voluntary employee deferral plans; 17.9% offer employer matching/profit sharing plans; 7.1% offer employer-provideddefined benefit (DB) plans, commonly referred to as a SERP (Supplemental Executive Retirement Plan), and 67.9% do not offer non-qualified plans.