Enhanced offerings to make it easier for employees to save for retirement, combined with the growing U.S. economy, have stimulated employee contribution rates and account balances.
Deloitte’s 14th annual Defined Contribution Benchmarking Survey finds the number of plans offering step-up contributions increased substantially to 62% from 46% last year, and mobile transaction processing is now available for 59% of plans (up from 52% in 2013-14 and 25% in 2012).
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“Our research shows us that there is no single solution to engaging employees, and new, creative methods are critical to address the varied needs of retirement plan participants,” says Stacy Sandler, principal, human capital with Deloitte Consulting LLP. “It is imperative for plan sponsors and providers to continue to work together in developing and offering these tools that make it easier for employees to save and plan for their future retirement.”
This year’s survey, conducted with the International Foundation of Employee Benefit Plans (IFEBP) and the International Society of Certified Employee Benefit Specialists (ISCEBS), finds 40% of plan sponsors indicate the No. 1 reason for employee plan participation this year was the personal desire to save for retirement, surpassing last year’s top reason of taking advantage of the company match.
Although only 19% of plan sponsors still feel “most” employees are or will be ready for retirement, average account balances of participants grew in 2015 to US$99,011, up almost 4% from US$95,227 in 2013-14. Employee contribution rates also increased, with the median actual deferral percentage for non-highly compensated employees rising to 5.9%, a 13 percentage point increase over last year.
Year over year, the research has found there is no single answer to how to best to engage employees in saving for retirement.
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Lack of awareness or understanding was the leading reason for why employees do not participate, cited by 34% of employers. To address this concern, plan sponsors and providers are using multiple tactics to customize, target, and deliver messaging to encourage retirement savings and raise awareness of the amount of income needed in retirement.
The highest rated approaches used were general and multiple communications/education at 83% (up from 73% in 2013-14), followed by targeted communications at 68%, up from 56% in 2013-14. Group meetings remained in the top three at 66%, up from 60% in 2013-14.
As a top reason for plan participation, second only to personal desire to save for retirement, the match remains a critical retirement plan engagement tool for employees. Consistent with findings over the last three years, nearly all plan sponsors (94%) are offering some form of matching or profit-sharing contribution in their defined contribution plans, with 6% increasing the match. For the first time in five surveys dating back to 2009, 100% of plan sponsors with discretionary matching reported making the matching contributions.
“Our research highlights that while employee engagement is increasing, plan sponsors should continue to evaluate new methods of stimulating interest in saving for retirement,” says Michael Wilson, CEO of IFEBP and ISCEBS. “It’s critical that participants gain a clear picture of the savings they will need to meet their individual retirement goals—and it’s just as important for plan sponsors to do all they can to help their participants prepare for their retirement.”
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