The annual 64th Annual Survey of 401(k) and Profit Sharing Plans by the Plan Sponsor Council of America found some interesting and encouraging trends in plan design. So, what are NAPA-Net readers seeing—and promoting?
That’s right—that PSCA survey found that a record number of employees are eligible for and participating in 401(k) plans, and employers are increasing their default deferral limits in the wake of the SECURE Act. There were more Roth options than ever, an increase in the plans offering automatic enrollment, and even a “new normal” for default contribution rates in those designs.
So, what are NAPA-Net readers seeing with the plans they/you work with?
Roth Ranks
Well, for nearly half (48%), a Roth option is now in place at more than three-quarters of the plans they support. And for nearly a third (more)—31%—all of the plans they support now offer Roth.
For about 1 in 10 (11%), more than half offer Roth, roughly 8% say that about a quarter of the plans they work with now do, while only about 3% say that less than a quarter do.
“It’s insane to me that anyone wouldn’t offer this by now,” commented one reader. “Why wouldn’t they include Roth?” said another.
“We added to our plans 3-4 years ago and starting to see traction over the last 12 months,” was another reader’s comment. “We work with smaller employers (sub 25) and payroll is a high priority. Adding a Roth bucket must include employer’s ability to handle multiple deferral types,” added another.
Auto ‘Pilots’?
As for automatic enrollment, well, the results were comparable, though a bit less. Roughly a third (31%) commented that more than half the plans they support now provide it, and another quarter (26%) note that about a quarter do.
But only about one in five (22%) say that more than three-quarters do, and just 3% note that all of the clients they support do—identical to the percentage that responded that none of the clients they work with do. The remaining 15% observe that less than a quarter of the clients they support have automatic enrollment.
“For our smaller plans with inhouse payroll, etc., the notice requirements etc. are too onerous. We see it most useful in plans greater than 50 employees and all of our plans with more than 100 employees utilize it,” noted one reader. Echoing those concerns, another explained: “I have not been excited about pushing this due to weaknesses in managing this by my RK partners.”
Another stated that it was “Industry driven. Many employers with high pay check to pay check employees shy away from autos.”
“Most should be offering but don’t,” commented another. “Keep pushing” offered another. “Still resistance despite data showing otherwise—general feeling of not wanting to ‘screw’ employees when the reality is the opposite—some of them are getting ‘screwed’ by not participating.”
“We still get the concern that the ER doesn’t want to be too paternalistic in their approach,” explained another. “They will still use the force word when declining.”
“We primarily work with 403(b) plans, where autoenrollment hasn’t caught on as much as in 401(k). However, a number of plan sponsors that we work with do have employee mandatory contributions, and sizable ones at that.”
Default ‘Lines’
But then, another striking finding in the PSCA survey was that the most common default deferral rate was now 6%, rather than the 3% which has long dominated that finding. So, we asked readers how many of the plans with which they work offered automatic enrollment with a default deferral rate in excess of 3%.
31% - More than half of them
20% - Less than a quarter of them
15% - About a quarter of them
14% - All of them
12% - More than 75% of them
8% - None of them
And then we asked a question that may have caught some by surprise (or not)—how many of the plans they work with provide a Roth option as a default…
Well, as it turns out for the vast majority—83%—the answer was “none of them”—and the second-most common response (12%) was “less than a quarter of them,” with about 2% noting it was “about a quarter” of the plans they support.
Just 3% said all of them (though that was a striking result to me).
“This is a very progressive concept and I like it,” commented one reader. “The concept has been discussed with many of them,” noted another.
“Wish this were the case, but just hasn’t caught on so far,” observed another.
Thanks to everyone who participated in our weekly NAPA-Net Reader Radar poll!
