While plan sponsors and workers are not always aligned on issues of plan design, a new survey finds agreement on the number one reason for lack of plan participation — a lack of understanding.
According to Deloitte’s Annual Defined Contribution Benchmarking Survey, the most-cited reason by workers for lack of employee participation in defined contribution plans is no longer an “uncertain economy/job market” (14% in 2013, down from 24% in 2012), but instead a “lack of awareness and understanding” (30% in 2013, up from 21% in 2012).
Plan sponsors are also aware of this reality, consistently citing “lack of employee understanding” as the number one barrier to a more effective plan (30%) year after year.
Looking at the top two areas of confusion, the study found that employees don’t know which funds to invest in (55%) and how much to save for retirement (35%).
Plan Objectives
“Improving communication and education efforts” was only third on the list of most important plan objectives for plan sponsors, cited by fewer than one in five (19%). Topping that list was increasing participants’ savings rate, cited by 32%, and — a surprisingly close second — facilitating optimal retirement income replacement, named by 27%. Increasing participation rates was fourth, cited by 12%.
Only one in five (20%) of plans utilize the latest communication methods (smartphones and tablets) to educate employees on retirement readiness. However, employee satisfaction with handheld connectivity tools continues to climb, jumping to 61% from 53% in 2012 and 28% in 2011.
‘Group’ Think
When asked about tactics used to encourage savings and raise awareness of assets needed in retirement, plan sponsors’ highest rated approaches were general and multiple communications/education (73%, down from 78% a year ago) and group meetings (60%, down from 63%).
When plan sponsors were asked to identify the most effective ways to communicate to employees, group meetings (29%) led all other approaches. However, among plans with more than 10,000 employees, targeted communications (3%) were preferred over group meetings (21%).
At an individual level, targeted communications (cited by 56%), individual meetings (32%) and personalized communications (23%) topped the list, but all were down from 2012 results.
Retirement Income
With respect to introducing new retirement income solutions, nearly 3 out of 10 plan sponsors (29%) felt this was important — though only 4% of plan sponsors in 2013 indicated that they had added an in-plan annuity option, and just 5% had added an at-retirement income solution.
The survey found another shift related to the primary reason that employees participate in a DC plan; taking advantage of the company match (at 43%) overtook a personal desire to save for retirement (39%).
Deloitte’s 2013-2014 Annual Defined Contribution Benchmarking Survey was conducted electronically in conjunction with the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists. The survey’s 265 respondents are fairly evenly distributed by geography, size, industry and ownership status (i.e., publicly or privately held). You can download a copy of the survey here.
