U.S. plan sponsors taking proactive steps to boost member retirement success: survey

A disconnect exists between defined contribution plan sponsors’ intentions and actions when it comes to helping employees with financial wellness, according to a new survey by J.P. Morgan Asset Management.

Among more than 800 U.S. DC plan sponsors, 74 per cent said they have a very or somewhat high commitment to employees’ fiscal health, although just 41 per cent said they believe in taking proactive actions to put plan members on a strong savings and investment path. More than half (59 per cent) of plan sponsors said they focus on participants making their own choices.

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“While it is certainly encouraging to see that more plan sponsors are taking responsibility for the financial wellness of plan participants, we still see a sizeable gap between the importance plan sponsors place on their goals and how successful they believe their plans are in achieving them,” said Catherine Peterson, managing director and global head of insights programs at J.P. Morgan Asset Management, in a press release. “The survey demonstrates the benefits of plan sponsors taking a proactive approach through measures such as automatic enrolment, automatic contribution escalation and streamlining investment decisions.”

More than half (55 per cent) of plan sponsors offer auto-enrolment, an increase on the 28 per cent that said the same in 2013. However, fewer (38 per cent) use an automatic contribution escalation tool, which still represents a major increase from the 21 per cent that did so in 2013. As for why some plan sponsors choose not to use automated features, respondents cited employee pushback and individual financial responsibility. Notably, J.P. Morgan’s 2018 survey found most are either in favour or neutral about automatic features.

In terms of investments used in DC plans, target-date funds remain popular, the survey found. Nearly two-thirds (62 per cent) of plans offer them, up from 46 per cent in 2013. Among those that use them, 75 per cent are highly confident about the TDFs they’ve chosen and their monitoring processes. However, 30 per cent said they still don’t have a solid understanding of the specifics around the TDFs they offer.

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The survey also found most (71 per cent) plan sponsors use some type of advisor or consultant, with 67 per cent of this group saying they’re satisfied with those relationships. Some 24 per cent of this group said they’re extremely satisfied with their advisor or consultant.

“Our survey suggests that some DC plan sponsors have misconceptions about the concerns of their participants and are failing to take a proactive approach to plan design, with success suffering as a result,” said Meghan Jacobson, executive director at J.P. Morgan Asset Management. “It has been demonstrated that features such as automatic enrolment and automatic contribution escalation can have a significant positive impact on participation rates and savings levels and, working with advisors and consultants, plan sponsors may wish to consider the best way to take advantage of these features.”

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