An increased number of American workers are participating in DC plans.
Deloitte’s Annual Defined Contribution Benchmarking Survey finds that 77% of workers were in a DC plan in 2013, an increase of six percentage points compared to the previous year.
And the average account balance reached an all-time high of more than US$95,000 ($103,900), up from US$85,600 ($93,700) in 2012.
Among the key findings, as the economy continues to recover, the No. 1 reason for lack of employee participation in DC plans is no longer due to an “uncertain economy/job market” (14% in 2013 compared with 24% in 2012), but instead a “lack of awareness and understanding” (30% in 2013 compared with 21% in 2012).
“It is imperative that employers and plan sponsors continue to encourage the growing trend in saving for retirement and focus on developing the right tools to educate and engage the workforce,” says Stacy Sandler, a principal in Deloitte’s human capital unit. “Eighty-one percent of respondents identified improving participation education as a top-of-mind issue for a majority of employees.”
When looking at the top areas of confusion, the study found that employees don’t know what funds to invest in (55%) followed by not knowing how much to save for retirement (35%).
Employers should consider pursuing a simplification strategy designed to deliver the right mix of educational resources to employees based on the demographics of their workforce, she adds.
The survey also finds that companies are showing renewed confidence in the economy and taking steps to make DC plans more accessible and attractive to employees. For example, immediate eligibility for matching contributions increased to 62% in 2013, up six percentage points from 2012. At the same time, 43% of employees cited taking advantage of the company match as the top reason for participation, unseating a personal desire to save for retirement (39%).
“While immediate eligibility for match and automatic enrollment continue to drive employee interest, there is still work to be done,” Sandler explains. “Retirement planning is unique for every individual, but many tools are created with a one-size-fits-all approach. Having the ability to recognize the gaps within the system is a solid first step in implementing effective remedies and reaching employees through their preferred channels.”
The survey was conducted electronically in conjunction with the International Foundation of Employee Benefits Plans and the International Society of Certified Employee Benefit Specialists. The results were based on responses from 265 public and privately held companies in a comprehensive range of industries.
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