There has been an increase in the number of American plan sponsors whose primary focus is on improving the retirement readiness of their participants, according to a survey.

The Transamerica Retirement Solutions survey finds that 41% of survey respondents said helping employees accumulate retirement income is the primary goal of their plan, up from 35% in 2012.

Participant retirement readiness challenges were the also frequently cited, with sponsors indicating that “motivating employees to save adequately” (55%) and “helping participants invest wisely” (46%) were primary challenges.

While it’s an industry best practice to encourage employees to save at least 10% of their annual income for retirement, the study found that 90% of plans reported average contribution rates below this target. In fact, 46% of sponsors reported an average contribution rate of 4% or less.

“While it’s promising to see plan sponsors moving toward encouraging a retirement-ready workforce, there are still many obstacles to overcome,” says Laura Gaynor, vice-president and corporate plans practice leader of Transamerica Retirement Solutions.

Taking concrete steps to ensure that participants achieve a secure retirement has been challenging for some sponsors, but there is evidence that sponsors are responding to those challenges by using plan design and technology to help improve retirement outcomes for employees.

Examples of those measures include the following:

  • Streamlining investment options — On average, the number of DC plans offering more than 15 investment options has declined by four percentage points to 32%. Streamlining investment options is another way that plan sponsors can simplify the process of saving for retirement.
  • Utilizing online resources — Sponsors reported that providing easily accessible saving and investing guidance on their websites has had a positive effect, leading more participants to increase their savings levels and update their investment allocations.
  • Offering automatic features — Nearly half (48%) of the DC plan sponsors surveyed have implemented auto-enrollment, and nearly one-third (31%) have adopted automatic contribution increases. Survey results indicate that, once enrolled, only 10% of employees choose to opt out of their retirement plan.

Sponsors and the industry as a whole should ensure that participants meet their retirement goals by increasing the initial default contribution rate to at least 6%, she adds. “Automatic contribution increases can go a long way toward helping them reach that savings goal.”

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Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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