Better strategic design of group retirement plans and raising contribution rates can help employers improve employees’ retirement savings, according to the 2015 Capital Accumulation Plan Benchmark Report.
The report, titled Good Plan Design Empowers Members’ Futures, which is sponsored by Great-West Life, summarizes the results of updated plan sponsor profiles in the Canadian Institutional Investment Network (CIIN), in addition to an online survey fielded by Rogers Publishing, Benefits Canada‘s parent company.
The report found, for defined contribution plans, members contributed an average of 4.3% of salary and employers contributed an average of 4.9%. Group RRSPs had slightly lower contribution rates, at 4.3% for employees and 4.4% for employers.
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“Sponsors can use plan design to increase member contributions, while still managing plan costs,” said Jeff Aarssen, senior vice-president, group retirement services, wealth management at Great-West Life.
“For example, instead of matching employee contributions dollar for dollar, consider matching at 50 cents on the dollar to a higher percentage of employee earnings. Because people tend to contribute up to the maximum employer match, this plan design option can help increase their total savings.”
Other findings from the report include:
- 75% of DC plans and 18% of group RRSPs have mandatory participation.
- Voluntary DC plans have a 68% participation rate and voluntary group RRSPs have a 53% participation rate.
- Target date funds are now the default option for almost half of DC plans and group RRSPs.