New Trends Drive Better Retirement Savings Behavior

According to the data, education meetings help drive better outcomes. Plans that included Principal Retire Secure, which provides one-on-one planning sessions, saw higher participation and deferral rates from participants than those without Retire Secure (71% participation and 7% deferral rate compared to 59.6% participation and 6.8% deferral). Access to a group meeting drove up participation rates by 5.5 percentage points over those who did not have access (64.5% vs. 59%).      

The analysis also found plan design features improve savings behavior. Plans that offered automatic enrollment and automatic escalation features had the highest participation rate at 78%, more than 19 percentage points higher than those without these features. Nearly twice as many participants reached an overall contribution rate – including any employer match – greater than 11% when their employers’ plan default was 6% rather than 3% (61% vs. 32%).   

A Principal press release said providing multiple plan types also bumps up participation and savings rates. Participation in defined-contribution plans is 11% – 13% higher among highly compensated employees and 3% – 5% higher for non-highly compensated employees when combined with a nonqualified retirement plan versus a standalone defined-contribution plan. Average salary deferral percentages and account balances are also higher for both highly compensated employees and non-highly compensated employees when the two plans exist.    

The Total View covers various retirement plan designs: defined contribution, including 401(k) and 403(b); defined benefit; nonqualified; and employee stock ownership plans. The report includes benchmarks on trends among approximately 37,000 retirement plans with services provided by The Principal to 3.7 million eligible participants representing nearly $123 billion in assets under management.