Retirement Plan Sponsors Helping Participants Engage

March 13, 2013 ( – Employees are taking a more active role in their retirement plans due to factors such as improved communication by employers and regulations released in recent years, says a new survey.

The survey, “Trends in 401(k) Plans and Retirement Rewards,” jointly conducted by WorldatWork and the American Benefits Institute, found 73% of respondents said that 70% or more of their employees participated in their retirement plan. However, fewer than 10% of employees were found to be contributing the maximum amount possible.  

Thirty percent of companies surveyed have just an automatic enrollment feature; 26% have both an automatic enrollment and automatic escalation feature, and 18% were considering adding an automatic enrollment feature. The survey found companies without auto-enrollment are more likely to report lower employee participation rates than those with such a feature.   

“People tend not to opt out of participating in their retirement plan when they are automatically enrolled,” said Lynn Dudley, senior vice president of policy for the American Benefits Council, which is parent to the institute, during a press call. “Automatic escalation is also very helpful, especially when employers can work with employees to tie it to specific situations, such as raises or tax refunds, where more money will be available to contribute.” 

With regards to automatic escalation, employers need to help employees understand not only what deferral amount is right for them but also whether it exceeds the limits set by government regulation, Dudley told attendees. She added that policymakers will more than likely need to examine raising the limits in the near future, as feedback from the industry seems to indicate they are currently too low. 


Survey findings indicated that the Pension Protection Act (PPA) of 2006 impacted the providing of investment advice to employees. For respondents providing investment advice services to employees, 67% used an adviser that is independent of the plan’s investment options, an increase of around 20% since 2008. 

In addition, 20% of companies offer cash and debt management education to their employees. “Companies are focusing more on the financial well-being of their employees, helping them to know not only how much to save but also with handling debt issues,” said Dudley during the press call. Since the financial crisis has--and continues to have--an impact on employees’ personal financial matters, employers need to acknowledge that this can affect participation in their plan. 

“Through improved communications by employers, participants have become better at seeing the big picture of saving for retirement,” Cara Woodson Welch, vice president of policy and public affairs for WorldatWork, told call attendees, adding that employees have gained more confidence in their savings strategy by having “weathered the storm of the last few years.”  

The survey also found the number of investment choices being offered to employees continues to grow. Fifty-four percent of those surveyed said they offered 16 or more choices to employees, an increase since 2008. The most common choices selected by employees include target-date/lifecycle funds (68%) and domestic equity investments (67%). 

When asked how many investment choices were "too many" and would give the employee information overload, Dudley told PLANSPONSOR, “The investment choices are very much driven by the participants. They tell plan sponsors if the range of choices is either too wide or too narrow. Plan sponsors are spending the time needed to communicate with participants about this.” 

The survey found that only one in five companies believed new rules about fee disclosures have made participant communications clearer than before. Some companies (22%) found that such rules had made fee disclosures to employees less clear, while 58% reported no change in the clarity of such disclosures. 

According to the survey, the financial crisis of 2008 did not significantly affect employers contributing to their plans, with 88% of companies neither suspending nor eliminating matching contributions during the last five years. 

For 94% of respondents, cash was the preferred form of contribution over company stock. In cases where company stock is still used as the employer contribution, 93% of respondents said stock made up less than 20% of such contributions.  

The survey found that fewer employees are taking hardship distributions and loans. In 2012, only 25% of respondents said they had seen an increase in hardship distributions, and only 37% had seen an increase in the number of participants taking out a loan. In 2008, 43% saw an increase in hardship withdrawals and 49% saw an increase in loans.