Three-quarters (76 per cent) of U.S. defined contribution pension plan sponsors say their plan offers automatic enrolment, according to a new survey by investment consulting firm Callan.
The survey, which polled roughly 100 DC plan sponsors, found the vast majority used auto-enrolment for new hires, while far fewer offered this feature for current employees. Half of respondents said they use an auto-enrolment default contribution rate of between four and six per cent.
By comparison, just 66 per cent said they offer automatic escalation and the majority of these respondents said they use one per cent as their default escalation rate.
Read: A look at the landscape for automatic features in Canadian pension plans
The survey noted the 2019 Secure Act allows plan sponsors with an auto-enrolment safe harbour plan design to increase the auto-escalation cap to 15 per cent. Among plan sponsors with this plan design, 22 per cent said they have or will increase the auto-escalation cap to 15 per cent and another two per cent said they have or will increase the cap between 10 and 15 per cent.
Half of plan sponsors that said they’re making a change to the matching contribution formula increased the match in 2022 and another 25 per cent said they plan to increase the match this year.
More than 90 per cent of DC plan sponsors said they have a mix of active and passive investment funds. Collective investment trusts (84 per cent) and mutual funds (79 per cent) were the most prevalent investment vehicles reported by respondents. Just 16 per cent of plan sponsors said they changed the number of funds in 2022 and roughly the same percentage said they’re planning a change in 2023.
The survey also found half (52 per cent) of plan sponsors said they only offer a target-date fund suite, while 45 per cent offer the target-date fund suite as the default along with managed accounts as an optional service. Among plan sponsors that offer target-date funds, roughly 80 per cent said they use an implementation that was at least partially indexed, while just 15 per cent said they use an active-only strategy.
Read: Use of custom TDFs increasing among U.S. DC pension plans: report
Nearly all respondents said they offer plan members general guidance, while roughly 70 per cent said they offer advice. Nine in 10 (90 per cent) said advisory services are at least partially paid for by plan members.
More than two-thirds (70 per cent) of plan sponsors said they offer some financial wellness support and, among these respondents, 91 per cent said they offer this support in keeping with their organizational philosophy.
In addition, while the vast majority (90 per cent) of respondents said they break out retirement plan behaviour by various groups that could support diversity, equity and inclusion initiatives, just 10 per cent said they formally track DEI metrics in their retirement plan, due in part to the limits on data collected by payroll or record-keeper systems.
Roughly 90 per cent of plan sponsors said they benchmark the level of plan fees as part of their fee evaluation process and roughly half said they cut fees following their most recent fee review. Two-thirds (66 per cent) of plan sponsors said they’re either somewhat or very likely to conduct a fee study in 2023, while 40 per cent said they’re likely to move to lower-cost investment vehicles this year.
Read: 2022 Top 50 DC Plans Report: How are DC pension plans evolving?