Last week, I asked NewsDash readers to put their plan participant “hats” on, and choose from a list which underutilized retirement program feature or other benefits would help them the most in reaching their retirement savings goal?
Nearly six in ten (58.8%) of respondents work in a plan sponsor role, while 32.3% are TPAs/recordkeepers/investment managers and 8.8% are advisers/consultants.
From the list of underutilized retirement program features or other benefits, the one identified as helpful by the most respondents was auto escalation of deferral rate, cited by 39.4% of responding readers. This was followed closely by a stretched match formula, selected by 33.3% of respondents. More than one-quarter (27.3%) chose personalized retirement communications, while 21.2% selected a student loan repayment benefit.
“Raising the automatic enrollment default deferral rate” was chosen by 15.1% of readers as the underutilized retirement program feature that would help them most in reaching their retirement savings goal. “Allowing separated employees to continue to make loan payments after termination” was selected by 12.1%, and 3% each chose “ending automatic cashouts of low balances” and “a high-deductible health plan with a health savings account to save for future health care expenses.”
A couple of respondents who chose to leave comments about underutilized retirement program features or other benefits said an overall financial wellness program would help and a defined benefit plan would help. The importance of automatic enrollment was mentioned, though it is no longer considered an underutilized plan feature. And one commenter explained why underutilized plan features are underutilized. Editor’s Choice goes to the reader who said: “I would love to see auto-escalation tied in with timing of wage increases. Timing with raises would make it painless as more money would go to retirement at the same time more money goes into your pocket.”
A big thank you to all who participated in the survey!
Another item that would greatly and immensely help is if our company had a Defined Benefit Plan, in addition to our 401(k) Plan.
We have one extremely anti-auto-anything on our Committee which sets us back. We won the auto enrollment fight years ago but can’t convince him to approve a limit of 6%.
Generally speaking, “underutilized” program features are “under” utilized because (a) they are expensive, and/or (b) they are underutilized by workers. And there are few things more aggravating than expensive, underutilized retirement program features…
Employees who need to take a loan do so because they do not have any other access to cash. Requiring them to pay back the loan balance upon termination is asking for the impossible. If they had the money sitting around to do this, they wouldn’t have needed the loan in the first place.
Put in place a new employee auto enroll voluntary retirement saving plan that auto escalated using 60% of each pay raise until IRS max is reached
HSAs provide great tax treatment, and could provide a nice balance for retirement if one is fortunate in their family’s health, and wise in health care spending. This requirement limits success.
I’m not impacted by student loans personally, but I recognize the need for help in this area amongst my younger co-workers. I am interested in hearing what other plan sponsors are doing in this area as well as what legislation is being proposed to help our student debt-burdened population.
One not mentioned was personal financial wellness. Our company does not have it, but it would certainly have helped our family.
Auto enrollment is the most important, but most controversial. We have a responsibility to get employees to save and inform them. Isn’t it also as much our responsibility to let them know they can lose everything they have saved? That 401K’s can be super risky? I know someone that lost almost everything in 2008 during the crash. They have to continue to work in their 70’s and 80’s because of this. Aren’t we responsible for letting employees know that as well? I think so
We do not allow loans or hardship withdrawals. The intended purpose of a retirement plan is to fund retirement.
I would love to see auto-escalation tied in with timing of wage increases. Timing with raises would make it painless as more money would go to retirement at the same time more money goes into your pocket.
People just need to save for retirement from the beginning of employment. If we can get them to do that, we wouldn’t have to worry about underutilization.
NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.