A recent report notes that the most common reason plan sponsors picked their plan’s default rate is because it was recommended by an industry consultant or other professional. This week we asked readers to share their most recommended – and rejected – ideas.
Not surprisingly, this week’s respondents have made a lot of recommendations, even in just the past year. They included:
61.90% - Establishing a plan
57.14% - Changing recordkeepers
80.95% - Automatic enrollment
66.67% - Automatic enrollment at more than 3% default
52.38% - Contribution acceleration
28.57% - Contribution acceleration at more than 1% per year
52.38% - Change in QDIA
42.86% - Adding/changing a managed account option
28.57% - Adding a stretch match
23.81% - Immediate eligibility
57.14% - Reenrollment (automatically enrolling all eligibles, not just new hires)
66.67% - Adding a Roth option
14.29% - Adding lifetime income option
42.86% - Changing advisors
Other recommendations included to stop deferring when top-heavy and not safe harbor, amending the old 401(k) to a safe harbor plan so that owner can max out, conducting due diligence on their HSA provider, and a QACA safe harbor.
Most Recommended
As for which one of the recommendations respondents had made most in the past year:
19.0% - Establishing a plan
19.0% - Automatic enrollment at more than 3% default
14.3% - Automatic enrollment
9.5% - Changing recordkeepers
9.5% - Contribution acceleration
9.5% - Adding a Roth option
4.8% - Contribution acceleration at more than 1% per year.
4.8% - Adding a stretch match
4.8% - Reenrollment (automatically enrolling ALL eligibles, not just new hires)
4.8% - Changing advisors
Most Accepted
Turning to the recommendation(s) that this week’s respondents said had been most accepted, adding a Roth option (28.6%) was the clear winner, followed by:
14.3% - Establishing a plan
14.3% - Changing recordkeepers
9.5% - Automatic enrollment
9.5% - Change in QDIA
While contribution acceleration, adding/changing a managed account option, immediate eligibility, and reenrollment (automatically enrolling all eligibles, not just new hires), each drew about 5%.
We asked readers to share which of their recommendations had been rejected by clients or prospects in the past year. Here automatic concepts topped the list, with automatic enrollment at more than 3% default (62%), automatic enrollment (57%), and contribution acceleration (43%) topping the chart.
Also on the list were:
33.3% - Establishing a plan
33.3% - Changing recordkeepers
33.3% - Contribution acceleration at more than 1% per year.
33.3% - Reenrollment (automatically enrolling all eligibles, not just new hires)
28.6% - Immediate eligibility
23.8% - Adding a stretch match
23.8% - Adding a Roth option
23.8% - Changing advisors
19.0% - Adding/changing a managed account option
14.3% - Adding lifetime income option
9.5% - Change in QDIA
Most Rejected Recommendation
As for the one recommendation most rejected – well, automatic enrollment led here as well, cited by 38%, followed (distantly) by establishing a plan (14%), reenrollment (automatically enrolling all eligibles, not just new hires) (14%) and contribution acceleration at more than 1% per year (9.5%).
While the reason(s) for rejecting recommendations can be as varied as the plans, plan sponsors, and advisors involved, we also asked readers to cite the reason(s) for the rejection(s). And yes, they were varied, ranging from a resistance to change (24%) to a deferral for future consideration (9.5%) to cost (5%). Concerns about being too paternalistic was cited a number of times, as well as concerns about controlling participants' choice, a fear of employees’ reaction, an inability to understand the potential/perceived cost, a general resistance to change, and “too much work.”
We received a number of reader insights along with their responses, including:
- It's frustrating. Sponsors are stuck with the auto-enrollment at 3%.
- Employers don't want to listen to the “experts.” They always think they know best and don't want to hear anything that prevents them from maxing out their own contributions!
- A number of small business owners seem to be most focused on not giving employees extra money, even where there are benefits to themselves. I think in the under 50 employee market we specialize in, they know their employees, maybe thinking about the 1 or 2 difficult employees that they just can't stand benefiting.
- Many committees are irrationally concerned about employee backlash. We’ve been adapting our message to the committee along with how they can get in front of ppt communications with an effective change management process.
- The plan committee often embraces the advice, only to be shot down by management, who are not engaged or don’t/won’t understand the benefit for the participants.
- In spite of studies that say otherwise, plan sponsors seem resistant to automatic enrollment because they think the employees “can't afford it” and will be unhappy with them for implementing it. They are averse to automatic increase for the same reasons and also because of the recordkeeping involved.
- Life is good. DOL fiduciary regulations are not (they are very disruptive and costly).
Thanks to everyone who participated in our weekly NAPA Net reader poll!
