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Decline in Participation Rates Halted, But Still Low

According to the Employee Benefit Research Institute (EBRI), the three-year decline in participation rates precipitated by the Great Recession halted in 2011, as 54% of full-time workers age 21-64 participated in their employers’ retirement plans. When part-time, seasonal and self-employed workers are included, that number drops to less than 40%. Results vary depending on ethnicity, gender, industry, income and even health status.

With participation rates so low, employers and employees alike need to be made acutely aware that unless people don’t expect to retire or have other sources of capital, participation in a DC plan should not be an option.

While auto enrollment is an easy and obvious solution to help workers, plan sponsors may be reluctant because of increased costs, administrative headaches or because they don’t want to force anything on their employees. Overcoming these hurdles is not easy, but advisors can gently push clients to this obvious solution by sharing relevant benchmark studies of their peers and describing their successes focusing on the “what’s in it for them” dynamic.

Getting participation rates up means nothing if deferral rates are too low or if investments, especially the QDIA, don’t match the needs of the participants. But like the lottery, you have to be in it to win it.

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