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401(k) Features Build Assets, But Can Do More

More than 50 million employees in the United States participate in a 401(k) plan, and recent research shows strong employee interest in contributing part of one’s salary to achieve a comfortable retirement. Employers have a variety of features they can incorporate in the plans they offer, and they can use them to increase not only assets, but employee participation and involvement too.

The assets certainly are growing. Pensions & Investments reports that for the year that ended on Sept. 30, 2013, DC assets in the 1,000 largest U.S. retirement plans (free registration required) grew by approximately 17% from the previous year, reaching $8.35 trillion.

There is more than one way to keep that going, Bank of America Merrill Lynch says in a recent white paper. The paper suggests that plan features offer more than a way to build balances.

BoA Merrill says that 82% percent of employees are willing to contribute a portion of their salaries to put toward retirement, and that financial benefits are a key factor to 80% of employees when considering a job or job offer. But interest and participation could be even better, it argues.

Employers can raise participation rates, the paper says, by integrating 401(k) enrollment with health plan enrollment and through automatic enrollment. It advocates automatic increases and a redesigned employer match to increase contributions, and suggests that employers offer advice, guidance and metrics to enhance employees’ financial wellness.

Reporting on the Plan Sponsor Council of America’s most recent study of 401(k) plans, Morningstar highlights the plan features an employer can use to establish and increase participation and involvement in a 401(k) plan. The vast majority of employers — 83% — offer an employer match, and 38% do so dollar for dollar. Typical plans offer more than 10 funds, with many offering more — although the PSCA warns that offering a large number of investment options runs the risk of overwhelming participants.

The PSCA report identifies other plan features: investment advice, controlling plan expenses, offering a Roth 401(k) option and making it possible to take loans and make withdrawals.

John Iekel is a writer/editor for ASPPA and its sister organizations, including NAPA Net.

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