Study Examines Sponsors' Motivations

June 9, 2010 ( – Employers considering looking for a new defined contribution (DC) provider in the next two years are almost equally concerned with understanding legislation, costs or fees, and encouraging employee participation, a new study said.

A LIMRA news release about its report: U.S. Employer Trends for Retirement Plans;Implications for Future Retirees, said the study covered more than 500 plan sponsors to assess their outlook about their plans.

Meanwhile, according to LIMRA, the study found that employers with a defined benefit (DB) plan currently looking or considering looking in the next two years for a DC plan provider are more likely to be planning to drop their DB plan in the next two years than those not thinking about a provider search.

Companies with DC plan assets under $5 million are more likely to consider adding other types of DC plans (profit sharing, money purchase) than companies of other asset sizes, LIMRA found in its poll.

Sponsors with non-401(k) DC plan assets of $1 million or more are more likely than companies with smaller DC plans to be planning to add a 401(k) plan in the next two years.

Nearly 18% of employers plan to make changes to their company match and nearly half of them plan to increase it.

LIMRA said the study also found that employers:

  • have not yet embraced automatic deferral rate escalation or in-plan guarantees.
  • currently offering a Roth 401(k) are more likely to be more committed to preparing their employees for retirement and have providers that are more engaged.
  • whose DC providers offer employee education are much more likely to be concerned with understanding legislation, employee retirement readiness, costs, and employees’ abilities to make changes to their plans.
  • whose providers offer investment advice are more concerned than those who do not with legislative changes, retirement readiness, costs, participation, and employees’ abilities to make changes to their plans.

More information is available here