Survey: Having Metrics in Place Can Lead to Better Retirement Preparedness

Plans that set specific goals around the retirement preparedness of their 401(k) plan participants and have metrics in place to measure their progress are more likely to achieve their goals, according to a recent report.

Conducted in the fall of 2016 with HR executives at 401(k) plan sponsors with $100 million or more in assets, T. Rowe Price’s “HR Perspectives: A Survey of Larger 401(k) Plans” study offers a unique view of the challenges HR and benefits professionals face when assessing how well their plans are helping participants prepare for retirement. The survey asked questions about strategic goals of 401(k) plans, retirement preparedness, plan design features and target date funds.

Auto-Escalation Trailing Auto-Enrollment

While most large 401(k) plan sponsors include auto-enrollment in their plans, auto-escalation features appear to be lagging by a slight margin. Coming shortly after the 10th anniversary of the Pension Protection Act, which codified auto-enrollment, the survey finds that 72% of plans currently offer the feature, while 6% of plans expect to do so within the next two years.

Only 58% of plans include an auto-escalation feature, the survey found, but 11% of respondents indicated that they plan to add this feature over the next two years. T. Rowe notes that one drawback is that auto-escalation programs often have been applied on an opt-in basis rather than an opt-out basis, thus limiting their impact.

Auto-Enrollment Still Mostly for New Employees

Only 55% of plans currently offer an investment reenrollment program to default participants into a qualified default investment alternative (QDIA), the survey found, while 48% currently include periodic enrollment of non-participants. It’s worth noting that automatic enrollment has been primarily directed at new employees, with many plans largely overlooking non-participating existing employees. These numbers do appear to be changing — the survey found that 9% of respondents plan to offer a reenrollment program and 13% plan to implement periodic enrollment of non-participants within the next two years.

Traditional matches still hold of slight majority (51%) among employers that offer matches. But stretch matches hold a sizable percentage, with 38% offering that feature alone and 8% offering both a traditional and stretch match. The strongest reason employers do not offer a stretch match is over concern it might not be well-received by employees due to the required high contribution rate (69%).

Wellness Focus

For plans that view retirement plan leakage as a problem (70% of respondents), half or more report that they offer some version of a financial wellness program or education services to help participants manage their day-to-day finances.

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