Employers Focus on Employee's Retirement Readiness
Plan sponsors identified employees’ retirement preparedness as one of their top priorities in 2010, according to Deloitte Consulting’s Annual 401(k) Benchmarking Survey for 2010. Nearly two-thirds of the 650 employers responding said that they have a responsibility to take interest in whether employees are headed toward a comfortable retirement.
Only 15 percent of sponsors said most employees will be sufficiently prepared for retirement.
Participants were cautious.
Adding to sponsors’ concerns were recent participant activities. The most common actions taken by participants in the previous 12 months were:
- Decreased deferral rates (seen in 41 percent of plans)
- Increased loan activity (41 percent)
- Increased withdrawals (49 percent)
- Rebalancing to less aggressive portfolios (21 percent)
Eligibility requirements were limited.
To make it easier for employees to participate in the company’s retirement plan, 56 percent of responding sponsors had no service requirement for enrolling in the plan, and 42 percent had no minimum age requirement.
Almost 50 percent said their plans included automatic enrollment, and 47 percent noted a higher average contribution rate as a result.
Automatic contribution escalation was a feature in 44 percent of plans, but less than 10 percent of participants were using it.
Contribution rates were fairly steady.
Deferral rates for highly compensated employees remained unchanged from the previous year, averaging between six percent and eight percent. The average rate for non-highly compensated employees fell from the six percent to eight percent rage to the four percent to six percent range.
Investments received attention.
In the latest survey, sponsors reported offering 20 investment options, which is about the same as the previous year.
Almost two-thirds reported that they review investment performance on a quarterly basis.
In the past year, nearly 40 percent of plans had replaced a fund due to poor performance.
More than half (51 percent) offered individual financial counseling and/or investment advice to participants.
The entire survey is available at http://tinyurl.com/Deloitte2010Benchmarking.