Nearly half of state and local government employees (47%) approve of automatic enrollment in defined contribution plans, known in the space as supplemental retirement plans (SRPs), the Center for State and Local Government Excellence (SLGE), ICMA-RC and Greenwald & Associates learned in a survey of 400 government employees.
If they were auto-enrolled into a SRP, 77% of these employees say they would remain invested in the plan. Employees who approve of auto-enrollment say it encourages saving (24%), that people are unprepared for retirement (14%), that people would not enroll on their own (13%) and that it is done with the best interests of the employee in mind (13%).
Additionally, 44% approve of the employer setting a default deferral rate. SLGE said it conducted the survey since few government agencies auto-enroll their workers into a SRP.
Approval of auto-enrollment declines from 24% when the default rate is 1% to 12% when the default rate is 7%. At the same time, 38% disapprove of auto-escalation, and 30% approve of it.
Seventy-nine percent said they are satisfied with their retirement plan. Eighty-four percent are saddled with consumer debt. Eighty-five percent have savings goals other than retirement. Sixty-seven percent said debt is preventing them from saving more for retirement.
A slim majority want more information about general financial issues and retirement planning. Thirty percent would welcome an increase in one-on-one in-person communication by their employer and financial services companies.
“The findings are critically important given that the responsibility of saving for retirement in the public sector is shifting from the employer to the employee in many jurisdictions,” says Rivka Liss-Levinnson, director of research at SLGE and author of the report. “The fact that those presented with a 7% default settled on a significantly higher rate than the group given the 1% default rate is important. This suggests that employers, retirement plan providers and policymakers should consider how small nudges—such as changing the default rate for auto enrollment in a SRP—can combat inertia and impact an employee’s ability to save for retirement.”