The Total View reports use of automatic enrollment by The Principal clients doubled in 2006 with the average participation rate 14% higher than with traditional plans, according to a press release. Automatic annual increases tripled with nearly 30,000 participants choosing to have their savings rate increased automatically each year. The average automatic increase selected was nearly 1.3% for an average of five years.
Simple enrollment forms also tripled in 2006 among plan sponsors not using automatic enrollment, the release said. Nearly 11,000 plans replaced complicated enrollment forms with The Principal’s process called Easy Enrollment allowing participants to sign up in three steps.
Use of a pre-set savings rate quadrupled with nearly 7,000 plans offering employees a suggested beginning savings rate. The suggested salary deferral rate is pre-set by employers – typically to coincide with the employer match. The average starting deferral rate was nearly 5%.
Additionally, 80% of plan sponsors offered a lifecycle option in 2006 – twice as many as in 2004. The number of plan sponsors who chose a lifecycle option as their retirement plan’s default option more than tripled in 2006 from the previous year.
The Total View also reports that participation increased by nearly 12 percent in plans that offered personalized, one-on-one assistance at the worksite.
Other key findings, according to the news release, included:
- Females participated in their employer retirement plan at a slightly higher rate than men but had significantly smaller nest eggs. The average account balance for men was 77% higher than the average account balance for women.
- Employees who earned more than $30,000 a year participated in their retirement plan at twice the rate of those who earned less than $30,000. The average account balance for highly compensated employees (about $157,000 per year) was nearly five times that of non-highly compensated employees ($32,000).
- Younger participants (age 34 and under) were more likely than any other age group to cash out their retirement account when changing jobs. Twenty percent of the assets of younger job changers were taken as cash compared to only 7% of retiree assets cashed out in 2006. Overall, the vast majority of assets (90%) belonging to job changers remained invested in a retirement account in 2006.
The Total View is based on data for the 2006 calendar year collected from more than 38,600 full-service retirement plans and approximately 3.5 million participants served by The Principal. The report covers four core retirement plan designs: defined contribution, including 401(k) and 403(b); defined benefit; nonqualified; and Employee Stock Ownership Plan (ESOP).
To download the full report, visit http://www.principal.com/about/news/research.htm#retirement .