Plan Sponsors Doing More to Increase Plan Value

The survey found 95.3% of plan sponsors made matching contributions in 2012, when provided for in the plan—up from 89.0% in 2010 and 85.2% in 2009. “We are pleased that companies recognize the importance of matching contributions,” PSCA Executive Director Bob Benish told PLANSPONSOR, adding that it indicates plan sponsors have recovered from the 2008 recession.

Retirement plan sponsors also continue to add plan design features to help their employees save. According to the survey, Roth after-tax contributions are now available at more than half of companies; automatic enrollment is used by nearly half of plans (47.2%), including 61.5% of large plans; more plans are using a default deferral percentage higher than 3% of pay (35.2%); and nearly 60% of plans automatically increase the default deferral percentages over time.

“Plan sponsors are also increasingly doing what needs to be done from a communication and education standpoint,” Benish noted. In addition to the increase in auto-enrollment and auto-escalation, plan sponsors recognize they cannot just do it for participants and tell participants not to worry about it, he said.

According to Benish, plan sponsors are seriously looking at their need to provide financial education and promote financial wellness and literacy—particularly large plans, among which one-quarter offer comprehensive financial education programs. As financial wellness tools and programs become more available and cost effective, smaller and mid-size plans will embrace them as well, he contended.

Benish pointed out the increasing use of mobile technology. “Society has embraced technology and participants want information how and when they want it,” he stated. The survey found, in large companies, mobile app penetration is 21.3%; among all plans, 13.3% use mobile apps for education.

Overall, Benish said, “The numbers don’t lie. The system is working; defined contribution plans continue to grow.” He pointed to survey findings that 87.6% of eligible employees have a balance in their employer plans, and they are saving an average of 6.8% of pay (up from 6.4% in 2011, and 6.2% in 2010).

“Participants get it. They are showing approval [of the defined contribution system] by actively participating and continuing to participate,” Benish continued. “This survey shows there is an appreciation for the system and participants appreciate the hard work plan sponsors are doing.”

Benish said he is pleased that people understand the value of their retirement benefits, but hopes they don’t take for granted the importance of having this tax-deferred system. Tax reform may lead to reduced contribution limits, so it is important that plan sponsors and participants are aware of this threat and are vocal about how the system works and that the tax advantage needs to be protected.

The survey is available for purchase at http://www.psca.org/56th-annual-survey-report, or for more information, contact PSCA at research@psca.org or 312-419-1863.