Employees should save more for retirement. That has been financial experts’ advice for many years, and that belief now has some enthusiastic cheerleaders — employers.
And they're doing more than just paying lip service to their support. Automatic enrollment and making it possible for employees to obtain financial advice and information are among the no-cost ways employers have been helping employees save for retirement for many years. But now they are more active in that regard, and a recent report by AonHewitt on 2013 trends concerning DC plans outlines how.
• Employer matches. Employer matches were one of the big targets of budget trimmers during the Great Recession, but it’s back in a big way. AonHewitt reports that in 2013, almost all — 98% — of the 400 employers it surveyed have a match. Not only that, the most common match is dollar for dollar up to 6% of employee deferrals.
• Eligibility to participate. It used to be common for employers to require employees to wait for a certain period after hiring to be able to participate in the DC plan. But that’s falling by the wayside — more than 75% of employers told AonHewitt that they allow new hires to participate immediately.
• Changing investment choices. Presenting someone who may not be conversant in a subject with a lot of information and requiring them to make choices can be intimidating for them. And risky. With that in mind, few plan sponsors told AonHewitt that they plan to expand the options from which participants can choose.
• Target-date funds commonplace. Eighty-six percent of the plans in the study offer target-date portfolios.
• Roths more widespread. More than four times as many employers allow Roth contributions than did so in 2007, with 50% now doing so. Nearly one-third of those allow in-plan Roth rollovers and conversions, and 16% plan to do so in the next year.
The report also offers some suggestions on how plan sponsors can bolster employees’ retirement savings, including increasing the default savings rate when auto enrollment kicks in to the plan’s match threshold — something that fewer than half of all plans do — and reducing the percentage of plan assets held in company stock.
John Iekel is a writer/editor for ASPPA and its sister organizations, including NAPA Net.
