To improve the long-term financial outlook for workers, a survey finds that the majority of U.S. companies now offer automatic features in their 401(k) plans to ensure workers are saving enough to receive full company matching contributions over time.
The Aon Hewitt survey reveals 29% of employers automatically enrol participants in the plan at a savings rate that is at or above the company match threshold.
Read: How well does auto-enrollment work?
Another 27% of employers automatically enrol individuals below the full match rate but automatically escalate contributions over time so workers will eventually be saving enough to receive the full company match.
The survey also finds 8% of companies automatically enrol participants below the full match threshold and have contribution escalation as an opt-in feature, and 70% of companies responding to the survey have auto-enrollment.
Read: Auto-enrollment paying off
Among plans with auto-enrollment:
- 7% default above the full company match level;
- 34% have default rates at the full company match level; and
- 59% default below the full company match level.
Of companies that have not implemented auto-enrollment:
- 67% cite the increased cost of the match as the biggest barrier;
- 37% are concerned about the reaction from employees; and
- 30% do not want small account balances in the plan.
Read: Many DC plan members don’t increase contributions
“Because many employers gauge the success of their plan by the number of workers saving enough to receive the full match, they understand that they need to give workers an added boost by either starting them off at a more robust savings rate or automatically escalating contributions over time up to, or beyond the match threshold,” explains Rob Austin, director of retirement research at Aon Hewitt. “That extra savings can have a remarkable impact on workers’ long-term savings outlook.”